Breeden Electronics (A) 1.

What would breakeven sales volume be, assuming a ratio of two RC1s sold for each RC2 sold?

Firstly, variable cost per unit need to be calculated in order to obtain contribution per unit to be included in the formula of break even sales volume. The calculation is as below:
Variable direct costs:

10,000 Total

RC1 Units Per Unit 5.50 3.50

5,000 Total $ 32,000 21,000 53,000

RC2 units Per Unit 6.4 4.2

Parts Direct Labour Total Direct Total Direct Per Unit Variable Overhead Supplies Total Units Variable Overhead Per Unit Total Variable Cost Per Unit Contribution per unit (SP VC)

$ 55,000 35,000 90,000

9.00

10.6

14,000 10,000 1.40 $10.40 9.60 ($20-10.40)

7,000 5,000 1.40 $12 11 ($23-12)

Then, find the total fixed cost involved in the Breeden Electronics (A): Manufacturing Cost Occupancy (Utilities, rent, maintenance) Equipment Maintenance Equipment depreciation Quality control and production engineering Manufacturing administration Total Manufacturing Cost $ 15000 17000 8000 15000 36000 91000 $

+ Selling and administrative Total Fixed Cost

40000 131000

After getting the contribution per unit and total fixed cost, then can insert those amount into formula of break even sales volume: Ratio = 2 RC1: 1RC2 Contribution per unit
RC1 RC2 Total

$ Total
19.20 (2x9.60) 11.00 30.20 (19.20+11.00)

B/E (units)

Fixed cost

Contribution per unit RC2 (units) = $131 000 = 4 338 units 30.20 RC1 (units) = 4 338 x 2 = 8 676 units RC1(sales) = 8676 x $20 = $ 173 520 RC2 (sales) = 4338 x $23 = $99 774

2.

What level of sales would provide the $210000 profit target for the year, as specified by

the parent company? (Assume that Breeden Electronics sells all they produce.) B/E = Fixed cost + Target profit Total contribution Calculation of target profit for each month: $210 000 12 months = $ 17 500 Thus, level of sales with $210 000 profit target for the year are as below: RC2 = $131 000 + 17500 = 4 917 units 30.20 RC1 = 4917 x 2 = 9834 units