Multiproduct, Contribution Margin. National Tennis Racquet Co. produces and sells three models:
|Less variable costs
|Less common fixed costs
a. What is the weighted average contribution margin per unit?
b. Calculate the break-even point in units assuming the current mix.
c. What would be the number of Smashers, Bashers, and Dinkers in the break-even level of sales?
The break-even point (BEP) of a firm can be expressed in terms of units or dollars sales. BEP units are computed by dividing the fixed costs by the contribution margin. The contribution margin is the amount that remains after variables costs are deducted from sales. At times a firm produces more than one product and therefore it is important to determine the weighted average contribution margin.
Answer and Explanation:
Weighted average contribution margin (WACM)
Break-even point (BEP)
The break-even point is approximately 2,893 units
The break-even point for smashers is approximately 579 units
The break-even point for bashers is approximately 1,157 units
The break-even point for Dinkers is approximately 1,157 units