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4. Green Meadows makes three types of portable coolers. The company’s total fixed cost is 1,080,000. Selling prices, variable costs, and sales percentages of each type of cooler: Model X100: selling price – 8,800; variable cost – 7,600; sales mix – 30% Model X950: selling price – 14,800; variable cost – 12,000; sales mix – 50% Model X800: selling price – 24,000; variable cost – 20,000; sales mix – 20% Compute the: A) break-even point in units B) break-even point in pesos C) if the company has a target profit of 1M, compute the number of units of each type of cooler that must be sold

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A) The computation of the break-even point in units for Green Meadows, which makes three types of portable coolers, can be determined using the following break-even formula:

= Fixed costs/Weighted contribution margin per unit

                                Model X100     Model X950       Model X800

=                              3,000 units          771 units           1,350 units

              (1,080,000/$360)  (1,080,000/1,400)    (1,080,000/800)

B) The computation of the break-even point in pesos for Green Meadows, which makes three types of portable coolers, can be determined using the following break-even formula:

= Fixed costs/Weighted contribution margin per unit

                       Model X100              Model X950         Model X800

=               240 million pesos      11,416,490 pesos      32,432,432 pesos

              (1,080,000/0.45%)  (1,080,000/9.46%)    (1,080,000/3.33%)

C) If Green Meadows has a target profit of 1M, the number of units of each type of cooler that must be sold is determined using the following break-even formula:

= Fixed costs + Target Profit /Weighted contribution margin per unit

                                Model X100     Model X950            Model X800

=                               5,778 units       1,486 units             2,600 units

                    (2,080,000/$360)  (2,080,000/1,400)    (2,080,000/800)

What is break-even analysis?

The break-even analysis is an accounting technique used to determine the break-even point.

The break-even point shows the units or dollars that must be achieved so that the total revenue equals the total costs, both variable and fixed.

Data and Calculations:

Fixed cost = 1,080,000 pesos

                                     Model X100  Model X950    Model X800

Selling price                       8,800          14,800              24,000

Variable cost                      7,600         12,000               20,000

Contribution margin           1,200          2,800                  4,000

Sales mix                              30%             50%                    20%

Weighted contribution

 margin                               360           1,400                    800

Weighted contribution

 margin ratio                    0.45%         9.46%                  3.33%

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