New Wave Technology Inc. manufactures and sells two products, MP3 players and sa
ID: 2371160 • Letter: N
Question
New Wave Technology Inc. manufactures and sells two products, MP3 players and satellite radios. The fixed costs are $300,000, and the sales mix is 40% MP3 players and 60% satellite radios. The unit selling price and the unit variable cost for each product are as follows:products unit selling price unit variable price
mp3 players $60 $45
satellite radieos 100 60
a. Compute the break-even sales in units for both products combined.
units _________
b. How many units of each product, MP3 players and satellite radios, would be sold at the break-even point?
MP3 players: _____ units
Satellite radios: ____ units
Explanation / Answer
Based on the above, the gross profit on the MP3 player is $15/unit. The gross profit on the satellite radio is $40/unit. 40% of sales are at $15 and 60% at $40 gross profit. Therefore $6 + $24 = $30 (average profit). a. $300,000 divided by $30 = 10,000 total combined units sold. b. No. of MP3 players sold: 10,000 x 0.4 = 4000 units (at $15 = $60,000 gross profit) No. of satellite radios sold: 10,000 x 0.6 = 6,000 units (at $40 = $240,000 gross profit)