Tools › Finance and Business › Pricing › Break-Even and Pricing › Example

Garrison Chapter 5: Sound Unlimited multiproduct break-even

ToolBreak-Even and Pricing
SourceGarrison, R. H., Noreen, E. W., and Brewer, P. C. (2015). Managerial Accounting, 15th ed. McGraw-Hill Education, New York. Chapter 5, Sound Unlimited.
LevelUndergraduate

Problem

Sound Unlimited sells two CDs: Le Louvre at $20 with $15 variable cost and Le Vin at $80 with $40 variable cost, 1,000 of each a month, against fixed expenses of $27,000. Find the overall contribution margin ratio, the break-even sales and the net operating income.

Inputs to Enter

  • Multi-product analysis: Le Louvre CD, 20, 15, 1000 / Le Vin CD, 80, 40, 1000; fixed costs 27,000
Open the Break-Even and Pricing tool

Answers

  • Total sales $100,000, total CM $45,000, overall CM ratio 45 %; Le Louvre CM ratio 25 % (20 % of sales), Le Vin 50 %
  • Break-even sales $60,000; net operating income $18,000

Notes

Choose the multi-product analysis and replace the default GMAT/GRE rows with the two CDs.

More Examples for This Tool