Answer:
See answer below
Explanation:
1. The break even point for flowers = Fixed costs / Contribution margin
Where contribution margin = Selling price per unit - Variable cost per unit
= $500,000 / ($20 - $10)
= $500,000 / $10
= 50,000 units
Therefore,
Break even point for the Mugger is 50,000 units.
Break even points for Dogs = Fixed costs ÷ Contribution margin
= $500,000 / ($25 -$20)
= $500,000 / $5
= 100,000 units
Break even points Sports = Fixed costs / Contribution margin
= $500,000 / ($10 - $6)
= $500,000 / $4
= 125,000 units
2. I can recommend that the mugger should change its product mix from 1:4:2 (Flowers, dogs, sports) to 4:2:1 (Flowers , dogs , sports)
• Because there is an increase in the break even points for each of the mugger.
