Ahmed co makes and sells two types of shoes plain and fancy...

Ahmed & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows: Plain Fancy Unit selling price $ 21.00 $ 32.00 Variable cost per unit 10.00 28.00 Sixty percent of the unit sales are Plain, and annual fixed expenses are $57,400. Assuming that the sales mix remains constant, the number of units of Plain that Ahmed must sell to break even is: (Round intermediate calculations to 2 decimal places and final answer to nearest whole number)

Transcript

00:01 So in the question we are required to find the break -even unit for amherk and company and they produces and sells two types of shoes that is plain shoes and fancy shoes.

00:11 So first of all, the step one for this solution is going to be calculation of contribution margin per unit.

00:35 So the unit selling price for plain shoes and fancy shoes are given to us.

00:39 So first of all, we will write the unit selling price.

00:47 So for plain shoe, it is given that the shoes are sold at $21 per unit and fancy shoes are sold at $32 .00 per unit.

00:59 And we have variable cost per unit and that is given to us $10 for plain shoes and $28 for fancy shoes.

01:17 So now if we subtract this variable cost per unit from the unit selling price, then we will be getting the contribution margin per unit.

01:29 So the contribution margin per unit for plain shoes is going to be $21 less $10 and that gives us $11.

01:41 Similarly, the contribution margin for fancy shoes is going to be $32 less $28 and this will be $4 .4.

01:49 Dollars per unit.

01:52 So now we have calculated the contribution margin per unit.

01:56 The step two will be calculation of weighted average contribution margin per unit.

02:05 So for this we have been given the sales mix that is the plain shoes comprises of 60 % of the sales.

02:20 So plain shoes consist of 60 % sales and this fancy shoes.

02:25 Shoes will be of rest percent that is 40 percent or we can say this one 0 .6 or 0 .4 times.

02:38 So this is the sales mix given to us.

02:40 Now for calculating the weighted average contribution margin per unit will prepare a table first of all.

02:47 So first column denotes the types of shoes.

02:50 So first of all we will be taking the plain shoes.

02:53 Now plain shoes contribution margin per unit we have calculated to be $11.

03:00 And the sales mix is of 60 % or 0 .6 so let this be the weight that is 0 .6 and this weighted contribution margin per unit will be contribution margin per unit times its weight that is 11 times 0 .6 then this is going to be 6 .6.

03:19 Similarly we have other type of shoe that is fancy shoes its contribution margin per unit is 4 dollars and its respective sales mix or weight we can say is 0 .4...

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