mith Company can produce two types of carpet cleaners, Brighter and Cleaner. Data on these...
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Accounting
mith Company can produce two types of carpet cleaners, Brighter and Cleaner. Data on these two products are as follows:
BrighterCleanerSales volume in units400600Unit sales price$1,000$1,000Unit variable cost200700
The number of machine hours to produce one unit of Brighter is 1, while the number of machine hours for each unit of Cleaner is 2. Total fixed costs for the manufacture of both products are $300,000.
Required:
1. Determine the breakevenpoint in total units for Smith Company, assuming that the sales mix (on the basis of relative sales volume in units) remains constant. Use the weighted-average contribution margin approach.
2. At this breakeven level, how many units of each product must be sold? Due to rounding, the total breakeven units for Requirement 2 may differ slightly than in Requirement 1.
3. Using the Indirect approach, what is the overall breakeven point in sales dollars? Use the breakeven units computed in Requirement 1.
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