Question 1173641: A Leading manufacturer of Action Figures is about to introduce four new Action Figures. The
accompanying table summarizes price and cost data, combined fixed costs equal $85,000. A
marketing research study predicts that for each unit sold of Noyan, 2 units of Dogan, 3 units of
Bamsi and 4 units of Turgut will be sold.
Action Figures
Turgut Bamsi Dogan Noyan
Selling Price (in dollars) 35 26 24 16
Variable Cost/unit(in $) 17 12 12 11
a) How many product mix units must be sold to break even?
b) How does it translate into sales of individual games?
Answer by CPhill(1987)   (Show Source):
You can put this solution on YOUR website! Let's break down this problem step-by-step to determine the breakeven point and the individual sales of each action figure.
**1. Calculate the Contribution Margin per Unit for Each Action Figure:**
* **Turgut:** $35 (Selling Price) - $17 (Variable Cost) = $18
* **Bamsi:** $26 (Selling Price) - $12 (Variable Cost) = $14
* **Dogan:** $24 (Selling Price) - $12 (Variable Cost) = $12
* **Noyan:** $16 (Selling Price) - $11 (Variable Cost) = $5
**2. Determine the Sales Mix Ratio:**
* The marketing research predicts the sales mix as follows:
* Noyan: 1 unit
* Dogan: 2 units
* Bamsi: 3 units
* Turgut: 4 units
**3. Calculate the Weighted Average Contribution Margin:**
* Multiply each product's contribution margin by its sales mix ratio and sum the results:
* (Noyan: $5 * 1) + (Dogan: $12 * 2) + (Bamsi: $14 * 3) + (Turgut: $18 * 4) = $5 + $24 + $42 + $72 = $143
* Divide the weighted average contribution margin by the total units in the sales mix:
* 1 + 2 + 3 + 4 = 10 units in the mix.
* Weighted Average Contribution Margin= $143 / 10 = $14.3 per sales mix unit
**4. Calculate the Breakeven Point in Sales Mix Units:**
* Divide the fixed costs by the weighted average contribution margin:
* Breakeven Point (Sales Mix Units) = $85,000 / $14.3 = 5944.06 (approximately 5944 sales mix units)
**a) How many product mix units must be sold to break even?**
* Therefore, approximately 5944 sales mix units must be sold to break even.
**b) How does it translate into sales of individual games?**
* Multiply the breakeven point in sales mix units by the sales mix ratio for each action figure:
* Noyan: 5944 * 1 = 5944 units
* Dogan: 5944 * 2 = 11888 units
* Bamsi: 5944 * 3 = 17832 units
* Turgut: 5944 * 4 = 23776 units
**Summary:**
* **a) Breakeven Point (Sales Mix Units):** 5944 units
* **b) Individual Action Figure Sales:**
* Noyan: 5944 units
* Dogan: 11888 units
* Bamsi: 17832 units
* Turgut: 23776 units
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