Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 51

Extensions of CVP Analysis—Multiple Products (finding missing data)

Clovis Supply sells two models of saddles to retail outfitters—basic and custom. Basic saddles sell for $1,000 each and custom saddles sell for $1,500. The variable cost of a basic saddle is $600 and that of a custom saddle is $750. Annual fixed costs at Clovis are $280,500. The break-even point at the current sales mix is 500 total units.

Required

How many basic saddles and how many custom saddles are sold at the break-even level? In other words, what is the assumed sales mix?

Step 1 of 4

Break-even point (in units):

Break-even point is the level of operations at which the sales revenue and total costs (variable costs and fixed costs) become equal. There is no profit or no loss at break-even point sales.

Break-even point (in units) can be calculated using the following equation: