Break-Even Charts and Profit Volume 5 / 6

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Question 4c

Cardio Co manufactures three types of fitness equipment: treadmills (T), cross trainers (C) and rowing machines (R). The budgeted sales prices and volumes for the next year are as follows:
T C R
Selling price $1,600$1,800$1,400
Units 420 400 380
The standard cost card for each product is shown below.
T C R
$ $ $
Material 430 500 360
Labour 220 240190
Variable overheads 110 120 95

Labour costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labour costs are expected to be $55,000 for the next year.

Required:
(c) Using the graph paper provided and assuming that the products are sold in a CONSTANT MIX, draw a multi-product breakeven chart for Cardio Co. Label fully both axes, any lines drawn on the graph and the breakeven point. (6 marks)

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Question 4d

Cardio Co manufactures three types of fitness equipment: treadmills (T), cross trainers (C) and rowing machines (R). The budgeted sales prices and volumes for the next year are as follows:
T C R
Selling price $1,600$1,800$1,400
Units 420 400 380
The standard cost card for each product is shown below.
T C R
$ $ $
Material 430 500 360
Labour 220 240190
Variable overheads 110 120 95

Labour costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labour costs are expected to be $55,000 for the next year.

Required:
(d) Explain what would happen to the breakeven point if the products were sold in order of the most profitable products first.

Note: You are NOT required to demonstrate this on the graph drawn in part (c). (2 marks)

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