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Multiproduct, Contribution Margin. National Tennis Racquet Co. produces and sells three models

Multiproduct, Contribution Margin. National Tennis Racquet Co. produces and sells three models:

Smasher Basher Dinker Total
Units Sold             1,000             2,000           2,000             5,000
Sales         100,000         120,000         80,000         300,000
Less variable costs           50,000           48,000         24,000         122,000
Contribution margin           50,000           72,000         56,000         178,000
Less common fixed costs         103,000
Profit           75,000

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?

Break-even analysis:

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:

Question a

Weighted average contribution margin (WACM)

 Question b

Break-even point (BEP)

 The break-even point is approximately 2,893 units

Question c

Smashers

 The break-even point for smashers is approximately 579 units

Bashers

 The break-even point for bashers is approximately 1,157 units

Dinkers

 The break-even point for Dinkers is approximately 1,157 units

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