Smith Company can produce two types of carpet cleaners, Brighterand Cleaner. Data on these two products are as follows:
Sales volume in units Brighter: 400 Cleaner:600 Unit sales priceBrighter:$1,000 Cleaner$1,000 Unit variable cost Brighter:200Cleaner:700 The number of machine hours to produce one unit ofBrighter is 1, while the number of machine hours for each unit ofCleaner is 2. Total fixed costs for the manufacture of bothproducts are $307,500.
Required: 1. Determine the breakeven point in total units forSmith Company, assuming that the sales mix (on the basis ofrelative sales volume in units) remains constant. Use theweighted-average contribution margin approach.
2. At this breakeven level, how many units of each product mustbe sold? Due to rounding, the total breakeven units for Requirement2 may differ slightly than in Requirement 1.
3. Using the Indirect approach, what is the overall breakevenpoint in sales dollars? Use the breakeven units computed inRequirement 1.
