CMA Study Group

Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

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Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------

Original Message------


Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

------------------------------
Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------

Original Message------


Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

------------------------------
Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------

It's dividing the sales unit by 5000 to get to the mix but I have no idea why. The way I solve the problems is as you suggested Taking the weighted average of sales dollars to get each items weighted average of sales then taking the percentage of each items weight by an items contribution margin.

But my answer comes out to 21,186 units using this method

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Craig Calvert
Analyst
Brandenburg KY
United States
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Original Message:
Sent: 10-04-2019 11:21 PM
From: Arvin Ocampo
Subject: Question


Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

------------------------------
Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------

I never liked using ratios like that to find the break even or TOI/TNI for a multiple product situation, especially when there is more than two products. So, I just use the Weighted Average UCM and the BE formula (Fixed Costs/WAUCM = Break Even in total units).
Total unit sales = 40,000
A's % = 15/40 = 37.5%, B = 50%, C = 12.5%
A's UCM: (10-4)*.375 = 2.25, B's = 7*.5 = 3.5, C's = 9*.125 = 1.125, WAUCM = 6.875
150,000/6.875 = 21,818.1818 repeating, rounded to 21,819 units across all 3 products.

Alternatively, if they ask you haw many of a product you need to sell within that sales mix to BE, you just take the total sales and multiply it by their percentage.
For example, you would need to sell 10,910 units of product B in this sales mix to BE (21,819*.5).

I prefer this method to the Composite UCM (or bundle) method.

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Nicholas Tsirigos
United States
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Original Message:
Sent: 10-04-2019 11:21 PM
From: Arvin Ocampo
Subject: Question


Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

------------------------------
Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------

Original Message------

I never liked using ratios like that to find the break even or TOI/TNI for a multiple product situation, especially when there is more than two products. So, I just use the Weighted Average UCM and the BE formula (Fixed Costs/WAUCM = Break Even in total units).
Total unit sales = 40,000
A's % = 15/40 = 37.5%, B = 50%, C = 12.5%
A's UCM: (10-4)*.375 = 2.25, B's = 7*.5 = 3.5, C's = 9*.125 = 1.125, WAUCM = 6.875
150,000/6.875 = 21,818.1818 repeating, rounded to 21,819 units across all 3 products.

Alternatively, if they ask you haw many of a product you need to sell within that sales mix to BE, you just take the total sales and multiply it by their percentage.
For example, you would need to sell 10,910 units of product B in this sales mix to BE (21,819*.5).

I prefer this method to the Composite UCM (or bundle) method.

------------------------------
Nicholas Tsirigos
United States
------------------------------

Mason Enterprises has prepared the following budget for the month of July:

	Selling Price	Variable Cost	Unit
	Per Unit	Per Unit	Sales
Product A	$10.00	$4.00	15,000
Product B	15.00	8.00	20,000
Product C	18.00	9.00	5,000

Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

he made a proportion for the 3 production volumes by devided each one by 5
15÷5=3
20÷5=4
5÷5=1
So it become 3:4:1
And he mentioned that mix is constant

I hope it become clear now

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Hasan Hasan
Director/Manager
Egypt
Egypt
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Original Message:
Sent: 10-04-2019 11:21 PM
From: Arvin Ocampo
Subject: Question


Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

------------------------------
Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------

take the smallest Unit Sale number, in this case 5000, and divide by it the Unit Sales of the 3 products A, B and C. You will get to the product mix 3:4:1

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Giulio La Bua
Director/Manager
OPENTEXT
Munich
Germany
------------------------------

Original Message:
Sent: 10-04-2019 11:21 PM
From: Arvin Ocampo
Subject: Question


Can someone please explain how you get a product mix of 3:4:1? I thought you take the weighted average?

Mason Enterprises has prepared the following budget for the month of July: Selling Price Variable Cost Unit Per Unit Per Unit Sales Product A $10.00 $4.00 15,000 Product B 15.00 8.00 20,000 Product C 18.00 9.00 5,000 Assuming that total fixed costs will be $150,000 and the mix remains constant, the breakeven point (rounded to the next higher whole unit) will be

A.

21,819 units.

Answer (A) is correct. Given the constant product mix of 3:4:1 established by the budgeted unit sales, a composite unit consists of eight individual units (3 of A, 4 of B, and 1 of C). The unit contribution margins for A, B, and C are $6 ($10 selling price – $4 unit variable cost), $7 ($15 selling price – $8 unit variable cost), and $9 ($18 selling price – $9 unit variable cost), respectively. Hence, the contribution margin for a composite unit is $55 [(3 × $6) + (4 × $7) + (1 × $9)], and the breakeven point is 2,727.2727 composite units ($150,000 FC ÷ $55). This amount equals 21,819 (rounded up) individual units (8 × 2,727.2727).

------------------------------
Arvin Ocampo
Accountant
Centennial CO
United States
------------------------------