Data related to the expected sales of two types of frozen pies for XYZ Foods Inc. for thecurrent year, which is typical of recent years, are as follows
Break Even Point Problem #2.JPG
Instructions:
1. Determine the estimated units of sales of the overall enterprise productnecessary to reach the break-even point for the current year.
2. Based on the break-even sales (units) in part (1), determine the unit sales ofboth the apple pie and the custard pie.
3. Assume that the sales mix was 40% Apple Pie and 60% Custard Pie.Compare the break-even point with that in part (1). Why is it so different?
Solutions:
#1:
Unit Selling Price: Apple Pie: (12 * 20%) + Custard Pie: (10 * 80%) = 10.4
Unit Variable Cost: Apple Poe: (3 * 20%) + Custard Pie: (4 * 80%) = 3.8
Unit Contribution Margin: 6.6
Break-Even Sales = Fixed Cost divided by Unit Contribution Margin = 35,000 divided by6.6 = 5,303 units
#2:
5,303 units * 20% = 1,061 units of Apple Pies that must be sold to Break Even
5,303 units * 80% = 4,242 units of Custard Pies that must be sold to Break Even
#3:
Unit Selling Price: Apple Pie: (12 * 40%) + Custard Pie: (10 * 60%) = 10.8
Unit Variable Cost: Apple Poe: (3 * 40%) + Custard Pie: (4 * 60%) = 3.6
Unit Contribution Margin: 7.2
Break-Even Sales = Fixed Cost divided by Unit Contribution Margin = 35,000 divided by7.2 = 4,861 units
4,861 units * 40% = 1,944 units of Apple Pies that must be sold to Break Even
4,861 units * 60% = 2,917 units of Custard Pies that must be sold to Break Even
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