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Hi John,
First of all thank you very much for the free lectures and your efforts in doing so are inspiration to me for doing my bit of good in life.
Coming to the point! I am unable to make sense of this question, it may sound silly but would be kind to provide me with the principle/workings used to obtain the answer ”21,819 units” please.
Question:
Mason enterprises has prepared the following budget for the month of July:Selling price/Unit Variable Cost/Unit Sales/Unit
Product A $10 $4 $15,000
Product B $15 $8 $20,000
Product C $18 $9 $5,000Assuming that total fixed costs will be $150,000 and the mix remains constant, the break-even point (rounded to the next higher whole unit) will be…..
This is just like one of the examples I work through in my free lectures on CVP analysis.
You need to calculate the current CS ratio (divide total contribution by total revenue). The total CS ratio is 275,000/540,000 = 0.50926.
The breakeven sales revenue is therefore 150,000/0.50926 = $294,545.
The current total revenue is $540,000 for a total of 40,000 units.
Therefore to get total revenue of $294,545, the need to sell 294,545/540,000 x 40,000 = 21,819 units.
(you have typed $ signs in front of the units – the $ signs should not be there, because they are units 🙂 )
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