Question

Yegnaw Company produces and sells two types of yoga –training products. How to video tapes and basic equipment set (blocks, strap and small pillows). Last year, yegnaw sold, 14500 videos and 7250 equipment sets. Information on the two products is as follows;
Videos set Equipment
Price Birr. 17. 40 Birr. 21. 75
Variable cost per unit 5. 80 8. 70 Total fixed costs are Bir. 101, 500
Required; Answer the following
1, what are the sales Mix of videos and equipment sets?
2, Compute weighted average contribution margin?
3, Compute the break –even quantity of each product?
4, what is weighted average contribution margin ratio?
5, what is the overall break-even sales revenue?

Answer 1

The computations of the sales mix, weighted average contribution margins, and break-even quantity for Yegnaw Company are as follows:

1. The sales mix of videos and equipment sets is 2: 1 (14,500:7,250)

2. The weighted average contribution margins are:

                                                              Videos set     Equipment

Weighted average contribution margin Br. 7.42      Br. 4.70

3. The break-even quantity of each product is as follows:

                                                              Videos set     Equipment

Break-even point (units)                         13,679            21,596

4. The weighted average contribution margin ratios are as follows:

                                                              Videos set     Equipment

Weighted average contribution ratio        64%         36%

5. The overall break-even sales revenue is Br 707,927.60 (13,679 x Br 17.40                + Br 21.75 x 21,596).

What is the break-even analysis?

The break-even analysis is an accounting tool to determine that total revenue equals total expenses of Yegnaw Company.

The break-even analysis shows the break-even point, which is the point at which the company does not make a profit or loss but the total revenues equal total variable and fixed costs.

The break-even point is computed as the fixed cost divided by the contribution margin per unit. For multiple products, the break-even point can be computed by weighting the contribution margin as follows:

Data and Computations:

                                                Videos set            Equipment

Quantity sold last year                14,500                   7,250

Price                                          Br 17.40                Br 21.75

Variable cost per unit                    5.80                      8.70

Contribution margin per unit   Br 11.60                Br 13.05

Total contribution margin  Br 168,200         Br 94,612.50 (Br 13.05 x 7,250)

Total contribution margin for 2 products = Br 262,812.50

Weighted average contribution ratio 64%         36% (Br94,612.50/Br 262,812.50 x 100)

Weighted average contribution margin per unit:

                  Br 7.42 (Br 11.60 x 64%)  Br 4.70 (Br. 13.05 x 36%)

Total fixed costs = Br 101,500

                                                              Videos set     Equipment

Weighted average contribution margin Br. 7.42         Br. 4.70

Break-even point (units)                          13,679            21,596

                                          (Br 101,500/Br 7.42)   (Br 101,500/Br 4.70)

= Fixed costs/Weighted average contribution margin per unit

Learn more about the break-even analysis at brainly.com/question/21137380