Breakeven Point of Sales for Accounting- myassignmenthelp.com

Question: Discuss about theBreakeven Point of Sales for Contemporary Accounting. Answer: BREAKEVEN SALES CALCULATION IN UNITS= TOTAL FIXED COST (Bazley, Hancock Robinson, 2014). CONTRIBUTION PER UNIT IN DOLLARS= TOTAL FIXED COST (Cafferky, 2010). P/V RATIO Note: Since fixed cost for individual products is not given in the question, therefore composite contribution per unit will have to be calculated in order to find the breakeven units of individual products. The sales mix taken for the purpose of calculation of composite contribution as well as p/v ratio is the ratio of number units sold. It is given in the question that the number of units of product Private Zoo is 3 times the number of units sold of other individual products. Therefore, the ratio is 1:1:3 Calculation: PRODUCTS SQUID PROUD STASH PRIVATE ZOO TOTAL(Weighted Average) Units Sold (Old) 4500 4500 6000 Selling Price (A) 64 78 125 Variable Cost: Variable Manufacturing Cost Per Unit 40 48 93.75 (75+(0.25*75) Variable Selling Cost Per Unit 12 19(16+3) 22 Total Variable Cost (B) 52 67 115.75 Contribution Per Unit (A)-(B) 12 11 9.25 New Sales Mix (Given) (1:1:3) 0.2 0.2 0.6 Proportionate Contribution Per Unit $2.4 $2.2 $5.55 Weighted average contribution per unit $ 10.15 P/V Ratio (Contribution Per Unit/Selling Price Per Unit) 18.75% 14.10% 7.40% Weighted average p/v ratio 11.01% Total Fixed Overhead Manufacturing Overhead $1,50,000 Selling And Admin Overhead $1,20,000 Total Fixed Overhead $ 2,70,000 Breakeven Sales (Units) 26601 Breakeven Units 5320 5320 15961 Breakeven Sales In Value $ 24,52,220 Breakeven Sales In Value $ 4,90,440 $ 4,90,440 $ 14,71,321 Working Notes: Total fixed overhead= Manufacturing Overhead $1,50,000 Add: Selling And Admin Overhead $1,20,000 Total Fixed Overhead $ 2,70,000 Breakeven sales (units) = IN UNITS= TOTAL FIXED COST CONTRIBUTION PER UNIT = $270,000 $10.15 = 26601 units Now 26601 units have been divided in the proportion of 1:1:3 (as determined above) between the products viz. Squid, Proud Stash and Private zoo. Squid =26601 x 1 = 5320 units 5 Proud Stash = 26601 x 1 = 5320 units 5 Private Zoo = 26601 x 3 =15961 units 5 3) Breakeven sales (units) = IN DOLLARS= TOTAL FIXED COST P/V RATIO = $270,000 11.01% = $ 2452202 (difference in the sales amount because of rounding off the percentage of P/V ratio to 11.01%) Now sales of $245220 has been divided into the proportion of 1:1:3 (as determined above) between the products viz. Squid, Proud Stash and Private zoo. Squid = $2452202 x 1 = $490440 5 Proud Stash = $2452202 x 1 = $490440 5 Private Zoo = $2452202 x 3 = $1471321 5 Weighted average p/v ratio= (18.75%x 0.2*) + (14.10%x 0.2) + (7.40%x 0.6#) =11.01% (The percentage figure has been rounded off and due to this reason there could be slight variation in the amount of breakeven sales figure.)#0.2 = 1/5 0.6 =3/5 Weighted average contribution per unit= (12x 0.2) + (11x 0.2) + (9.25x 0.6) = $10.15 References Cafferky, M., 2010.Breakeven Analysis: The definitive guide to cost-volume-profit analysis. Business Expert Press. Bazley, M., Hancock, P. Robinson, P., 2014. Contemporary accounting, available on https://books.google.co.in/books?id=KgepBQAAQBAJpg=PA543dq=break+even+analysis+pdfhl=ensa=Xved=0ahUKEwj4m-vl8tbXAhVJto8KHZuiB5IQ6AEIMTAC#v=onepageq=break%20even%20analysis%20pdff=false. Assessed on 24-11-2017.