Break-Even Point in Units for a Multiple-Product Firm
Suppose that Chillmax Company now sells both pairs of shoes and fabric carryalls. The pairs of shoes are priced at $60 and have variable costs of $21 each. The carryalls are priced at $36 and have variable costs of $9 each. Total fixed cost for Chillmax as a whole equals $91,500 (includes all fixed factory overhead and fixed selling and administrative expense). Next year, Chillmax expects to sell 3,500 pairs of shoes and 875 carryalls.
Required:
1. Form a package of shoes and carryalls based on the sales mix expected for the coming year.
| Product | Price | – | Unit Variable Cost | = | Unit Contribution Margin | × | Sales Mix | = | Package Unit Contribution Margin | |
| Shoes | $fill in the blank 328ac1fe3068065_1 | $fill in the blank 328ac1fe3068065_2 | $fill in the blank 328ac1fe3068065_3 | fill in the blank 328ac1fe3068065_4 | $fill in the blank 328ac1fe3068065_5 | |||||
| Carryall | fill in the blank 328ac1fe3068065_6 | fill in the blank 328ac1fe3068065_7 | fill in the blank 328ac1fe3068065_8 | fill in the blank 328ac1fe3068065_9 | fill in the blank 328ac1fe3068065_10 | |||||
| Package total | $fill in the blank 328ac1fe3068065_11 |
2. Calculate the break-even point in units for pairs of shoes and for carryalls.
Break-Even Pairs of Shoes fill in the blank 328ac1fe3068065_12 units
Break-Even Carryalls fill in the blank 328ac1fe3068065_13 units
3. Check your answer by preparing a contribution margin income statement. Enter all amounts as positive value.
| blank | Total | blank | blank |
| Sales | $fill in the blank e3213303a024fe9_1 | blank | blank |
| Total variable cost | fill in the blank e3213303a024fe9_2 | blank | blank |
| Total contribution margin | $fill in the blank e3213303a024fe9_3 | blank | blank |
| Total fixed cost | fill in the blank e3213303a024fe9_4 | ||
| Operating income | $fill in the blank e3213303a024fe9_5 | blank | blank |