Question

Sales Mix and Break-Even Sales Data related to the expected sales of two types of frozen pizzas for Norfolk Frozen Foods Inc. for the current year, which is typical of recent years, are as follows: Products Unit Selling Price Unit Variable Cost Sales Mix 12" Pizza 16" Pizza The estimated fixed costs for the current year are $46,800. Required: 1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. $ 12 $ 3 30% 15 4 70% units Based on the break-even sales (units) in part (1), determine the unit sales of both the 12" pizza and 16 pizza for the current year. 12" pizza 16" pizza 3. Assume that the sale overall (total) product E units units s mix was 50% 12" pizza and 50% 16" pizza. Compute the break-even point of the units

Answer 1

1. Calculation of overall break even point

Statement showing calculation of weighted average contribution margin per unit for the sales mix

Particulars	12" Pizza	16" Pizza
Sales price per unit	12	15
Less : variable cost per unit	3	4
Contribution margin per unit (a)	9	11
Sales mix percentage (b)	30%	70%
(a × b)	2,7	7,7
Sum : weighted average contribution margin per unit ($2.7 + $7.7) = $10.4

Note :FORMULA FOR CALCULATION

12" PIZZA CM per Unit × 12" PIZZA Sales Mix Percentage
+ 16" PIZZA CM per Unit × 16" PIZZA Sales Mix Percentage = Weighted Average Unit Contribution Margin for PRODUCT E

Note : Break-even Point in Units of Sales Mix for Product E = Total Fixed Cost ÷ Weighted Average contribution margin per Unit

= $46800 / $10.4

= 4500 units

2.Unit sales of both 12" pizza and 16" pizza for the current year

Particulars	12" Pizza	16" Pizza
Sales mix ratio	30%	70%
× total break even units	4500	4500
Product units at break even point (IN UNITS )	1350	3150

3.

Particulars	12" Pizza	16" Pizza
Sales price per unit	12	15
Less : Variable cost per unit	3	4
Contribution margin per unit (a)	9	11
Sales mix percentage (b)	50%	50%
(a × b)	4,5	5,5
Sum : weighted average contribution margin per unit ($4.5 + $5.5 = $10)

Break-even Point in Units of Sales Mix = Total Fixed Cost ÷ Weighted Average CM per Unit

= $46800 / $10

= 4680 Units