Hat Company sells two types of hats: knit hats with a selling price of $15 and variable costs of $5, and hard hats with a selling price of $25 and variable costs of $10. Knit hats comprise 80% of all sales. If fixed costs are $22,000, what is the break even point in units?

Hat Company sells two types of hats: knit hats with a selling price of $15 and variable costs of $5, and hard hats with a selling price of $25 and variable costs of $10. Knit hats comprise 80% of all sales. If fixed costs are $22,000, what is the break even point in units?

multiple choice

    $2,750
    $2,000 Correct
    $7,333
    $11,000

Explanation

Knowledge Check 01
   
Weighted-average contribution margin per unit = ([$15 − 5 × 0.80 = $8] + [$25 − 10 × 0.20 = $3]) = $8 + 3 = $11 per unit. Break-even point in units = $22,000 / $11 = 2,000 units.
 

A company sells three products: Product A, Product B, and Product C. Usually it sells 5,000 units of Product A; 6,000 units of Product B; and 8,000 units of Product C. What is the sales mix for Products A, B and C, respectively?

multiple choice

    50%, 60%, 80%
    26.3%, 31.6%, 42.1% Correct
    5%, 6%, 8%

Explanation

Knowledge Check 01
 
Total unit sales = 5,000 + 6,000 + 8,000 = 19,000.
 
Product A = Units sales of 5,000 ÷ Total unit sales of 19,000 = 26.3%.
 
Product B = Units sales of 6,000 ÷ Total unit sales of 19,000 = 31.6%
 
Product C = Units sales of 8,000 ÷ Total unit sales of 19,000 = 42.1%.

Which of the following is NOT an assumption in CVP analysis?

multiple choice

    Costs can be classified as variable or fixed.
    Sales mix is not constant. Correct
    Costs are linear within the relevant range.
    Units produced are sold.

Explanation

Knowledge Check 01
 
All of these are assumptions except sales mix is not constant. Sales mix is assumed to be constant.