Breakeven Point Calculation: Sales Mix, Cost, and Profit Analysis

This assignment calculates the breakeven point for a company with three products: Squid, Proud Stash, and Private Zoo. It begins by determining the sales mix based on the number of units sold and then calculates the weighted average contribution per unit and P/V ratio. The total fixed overhead is ...Read More

Running Head: Breakeven Point Calculation
Breakeven Point of
Sales

Breakeven Point Calculation 1
BREAKEVEN SALES CALCULATION
IN UNITS= TOTAL FIXED COST (Bazley, Hancock & Robinson, 2014).
CONTRIBUTION PER UNIT
IN DOLLARS= TOTAL FIXED COST (Cafferky, 2010).
P/V RATIO
Note:
 Since fixed cost for individual products is not given in the question, therefore composite
contribution per unit will have to be calculated in order to find the breakeven units of
individual products.
 The sales mix taken for the purpose of calculation of composite contribution as well as p/v
ratio is the ratio of number units sold. It is given in the question that the number of units of
product Private Zoo is 3 times the number of units sold of other individual products.
Therefore, the ratio is 1:1:3
Calculation:
PRODUCTS SQUID
PROUD
STASH PRIVATE ZOO
TOTAL(Weighte
d Average)
Units Sold (Old) 4500 4500 6000
Selling Price (A) 64 78 125
Variable Cost:
Variable Manufacturing Cost Per
Unit 40 48
93.75
(75+(0.25*75)
Variable Selling Cost Per Unit 12 19(16+3) 22
Total Variable Cost (B) 52 67 115.75
Contribution Per Unit (A)-(B) 12 11 9.25
New Sales Mix (Given) (1:1:3) 0.2 0.2 0.6
Proportionate Contribution Per
Unit $2.4 $2.2 $5.55
Weighted average contribution
per unit $ 10.15
P/V Ratio (Contribution Per
Unit/Selling Price Per Unit) 18.75% 14.10% 7.40%
Weighted average p/v ratio 11.01%
Total Fixed Overhead
Manufacturing Overhead $1,50,000

Breakeven Point Calculation 2
Selling And Admin Overhead $1,20,000
Total Fixed Overhead $ 2,70,000
Breakeven Sales (Units) 26601
Breakeven Units 5320 5320 15961
Breakeven Sales In Value $ 24,52,220
Breakeven Sales In Value $ 4,90,440
$
4,90,440 $ 14,71,321
Working Notes:
1)
Total fixed overhead=
Manufacturing Overhead $1,50,000
Add: Selling And Admin Overhead $1,20,000
Total Fixed Overhead $ 2,70,000
2)
Breakeven sales (units) = IN UNITS= TOTAL FIXED COST
CONTRIBUTION PER UNIT
= $270,000
$10.15
= 26601 units
Now 26601 units have been divided in the proportion of 1:1:3 (as determined above) between the
products viz. Squid, Proud Stash and Private zoo.
Squid =26601 x 1 = 5320 units
5
Proud Stash = 26601 x 1 = 5320 units
5
Private Zoo = 26601 x 3 =15961 units
5
3)
Breakeven sales (units) = IN DOLLARS= TOTAL FIXED COST
P/V RATIO
= $270,000
11.01%
= $ 2452202 (difference in the sales amount because of
rounding off the percentage of P/V ratio to 11.01%)

Breakeven Point Calculation 3
Now sales of $245220 has been divided into the proportion of 1:1:3 (as determined above) between
the products viz. Squid, Proud Stash and Private zoo.
Squid = $2452202 x 1 = $490440
5
Proud Stash = $2452202 x 1 = $490440
5
Private Zoo = $2452202 x 3 = $1471321
5
Weighted average p/v ratio= (18.75%x 0.2*) + (14.10%x 0.2) + (7.40%x 0.6#)
=11.01% (The percentage figure has been rounded off and due to this
reason there could be slight variation in the amount of breakeven sales figure.)
#0.2 = 1/5
0.6 =3/5
Weighted average contribution per unit= (12x 0.2) + (11x 0.2) + (9.25x 0.6)
= $10.15

Breakeven Point Calculation 4
References
Cafferky, M., 2010. Breakeven Analysis: The definitive guide to cost-volume-profit analysis.
Business Expert Press.
Bazley, M., Hancock, P. & Robinson, P., 2014. Contemporary accounting, available on
https://books.google.co.in/books?
id=KgepBQAAQBAJ&pg=PA543&dq=break+even+analysis+pdf&hl=en&sa=X&ved=0ahU
KEwj4m-vl8tbXAhVJto8KHZuiB5IQ6AEIMTAC#v=onepage&q=break%20even
%20analysis%20pdf&f=false. Assessed on 24-11-2017.