Exercise 6-12 (Algorithmic) Break-Even Analysis: Multiproduct Environment Pondwa
ID: 2779923 • Letter: E
Question
Exercise 6-12 (Algorithmic) Break-Even Analysis: Multiproduct Environment Pondwater Enterprises produces two well-known products: Kleer Kleen and Gleem Kleen. Kleer Kleen accounts for 40 percent of her sales, and Gleem Kleen accounts for the rest. Kleer currently sells for $14 per tube and has variable manufacturing and selling costs of $7. Gleem sells for just $10 and has variable costs of $8 per tube. Pondwater has total fixed costs of $30,000. Required: Calculate the total number of tubes that must be sold for Pondwater to break even. If required, round your answer to nearest whole number. tubes
Explanation / Answer
Hence total Contribution margin=(7*0.4)+(2*0.6)=$4
Hence total breakeven=Fixed costs/Contribution margin
=(30,000/4)=7500 tubes.
Kleer Gleem Contribution margin=(Sales-Variable costs) (14-7)=$7 (10-8)=$2 Proportion 40% (100-40)=60%