SALES MIX BREAK-EVEN ANALYSIS

Teacher Page

1

INTRODUCTION

This WebQuest is designed to engage a fusion of the measurement, accumulation, analysis, and interpretationfunctionsof internal accounting to satisfy the controlling, evaluation, and planningobjectivesof decision making. In a more particularized perspective, break-even analysis is used as decision-making tool to determine indifferent points for production activity in units and earning activity in revenue dollars for an entire sales mix. An index that reflects the margin of safety will be calculated to indicate the possible decrease in sales revenue that may occur before a company sustains an operating loss.

2

LEARNERS

2.1. Students participating in the coursework and the lesson on break-even analysis must have basic competency in:

Intermediate Algebra
Principles of Financial Accounting
Basic Statistics

2.2. Learners competencies should include :

Formulation: Extracting pertinent information from an accounting situation as a basis for working on a break-even problem
Implementation: Selecting appropriate mathematical model and applying it to the solution of a break-even problem.
Conclusion: Carrying out extensions of the break-even analysis to related problems of planning, evaluation, and controlling.

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STANDARDS

3.1. Teaching Posture: National Council for Accreditation of Teacher Education (NCATE)—Standard 2 and 6: Assessment System and Unit Evaluation and Governance and Resources

3.2. Learning Posture: New York Education Standards (M8d): Management and planning analysis, in which the student:

Carries out a study of business or public policy situation involving issues such as optimization, cost-benefit projections, and risks.
Uses decision rules and strategies both to analyze options and balance trade-offs; and brings in mathematical ideas that serve to generalize the analysis across different conditions.

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PROCESS

4.1. Begin with consideration of the basic break-even formula for sales revenue:

4.2. Make the necessary adjustments in the denominator term of {TFC/[1-(v/p)]} to compute the sales mix-sales break-even point in revenue dollars. The denominator term in the break-even formula for a sales mix should reflect the weighted-contribution-margin ratio: {[Sum(1-(v/p)]w}. The sales mix break-even formula should be transformed to appear as {TFC/Sum[1-(v/p)]w},where v represents unit variable cost and p represents unit price.

4.3. Tabulate the prices and variable cost per unit in the first two columns of a matrix, and use the cues in the top cell of the other six column to find the necessary values.

(A)	(B)	(C)	(D)	(E)	(F)	(G)	(H)
Item (Quantities)	Price (p)	Cost (v)	(v/p)	(1-v/p)	Sales Revenue (p)(q)	Sales Revenue Weight (w)	Weighted Contribution Margin Ratio (E)(G)
Bar Soap (q= 5,000)	$1.79	$0.72
Tooth Paste (q = 8,000)	3.95	1.05
Detergent (q =4,500)	5.98	2.15
Shampoo (q = 9,500)	4.98	1.13
Total Fixes Cost: $980,000

4.4. Carry out the necessary calculation, using the results in the table and other information that is provided. Hint: The formula should indicate other information that is needed to carry out the break-even-sales-revenue calculations.

4.5. Calculate the margin of safety, and express the result as a ratio (i.e., not as a difference).

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RESOURCES

5.1. Mulitmedia: Use the spreadsheet applications on the compact disc that accompany your textbook to assist in conducting the computations.

5.2. Lecture Notes: Take cues from lecture notes provided in class to guide the sequence of break-even calculations.

5.3. Textbook: Reread the section of the chapter that explains and describe cost-volume-profit relationships and break-even analysis.

5.4. World Wide Web: Access http://share.pdfonline.com/ to get supplementary information to assist in understanding cost-volume-profit relationship and break-even analysis.

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EVALUATION

6.1. The project on cost-volume-profit relationship and break-even analysis, as Part I of the final exam (with a percentage weight 55%), will fall due on the Wednesday prior the last week of the semester.

6.2. An in-class exam will be administered, that constitute Part II of the final exam (with a percentage weight of 45%), on the last day of class.

6.3. Qualifying points will be assigned to the completed project and the in-class- administered exam according to the criteria in the rubric.

Evaluation Standards

PARAMETERS OF EVALUATION

EXEMPLARY

[A]

FAVORABLE

[B]

FAIR

[C]

DEFICIENT

[D-F]

Relevance of Response

to question

[48%]

Strong recognition of issues presented in coursework, project, and exams
Offers information in responses that are considered to be right perspectives
Expresses recognition of concepts as a result of reading course materials.

[40—48]

Responses show adherence to coursework, projects, and exams’ instructions with some degree of comprehension.

[30—39]

Response to questions (i.e., in-class confabs, projects, and exams) shows general understanding without nuances.

[20—29]

Demonstrates little or no integration of course-related theory
Minimal applications of course ideas that align with assigned projects.

[0—19]

Mechanics for

Project Performance

[20%]

Presents accurate description of related concepts in the practical aspect of projects
Outstanding articulation of issues in the theoretical ilk of exams.

[15—20]

Responses to descriptive aspect of exam rarely show unreasonable ideas and errors
Certain critical issues attempted in assigned project.

[10—14]

Responses to qualitative aspect of exam (project and exams) occasionally contain ideas unrelated to subject matter.
Sparse awareness of logical relations and structure

[5—9]

Descriptive responses to questions on exam often contain unreasonable and unrelated ideas.
Demonstrates lack of knowledge of or neglect of basic examination instructions.

[0—4]

Accuracy in Arithmetic

Applications

[20%]

Quantitative aspect of examination (project) is addressed with necessary calculations within bounds of accurate results.
Clear and thoughtful delineation of procedures in sophisticated style.

[15—20]

Understands questions but doesn’t demonstrate application possibilities.
Computational responses to questions are partial.

[10—14]

Participates in the in-class segment of coursework without significant commitment to fulfill exam (project) provisions.

[5—9]

No or low indication of background understanding of subject matter
Indications of deficiencies in literacy of basic course vocabulary and arithmetic procedures.

[0—4]

Interpretation of

financial statements

[12%]

Easily identifiable, plausible, novel, sophisticated, insightful, and clear deducing of factual information from source materials
Interpretations connect well with core issues of subject matter.

[9—12]

Promising, but may be slightly unclear or lacking in insights or originality.
Interpretation does not relate entirely well with subject matter.

[8]

May be unclear (vague terms), appear unoriginal, or offer nothing insightful
Interpretation of financial information and descriptive analyses are unimaginative.

[6—7]

Unidentifiable sense, specificity, and substance of financial statement analysis
Banal analysis of accounting information.

[0—5]

7	CONCLUSION The time allotted, independence, and the hands-on aspect to Part I of the break-even-analysis project should provided the opportunity to gain mastery in understanding how determining the indifferent point for a sales-mix revenue is vital for managerial decision making.

8	CREDITS With intense gratitude, homage is paid to: 8.1. Dr Irskine Walther for his resourcefulness in providing the exposure to WebQuest. WebQuest is less complex that Cengagebrain that I used for course management. 8.2. Various examples of creating WebQuest on websites I consulted.