SALES MIX

Sales Mix

 Is the standard relationship of the products sold in a given period of

time.
 Computed using average contribution margin
Sales Mix

 Average Unit Contribution Margin = Sum of CM per unit multiplied by

Sales Mix Ratio in Units
 Example:

Product CM/Unit Sales Mix Ave. UCM

Alpha 30 30% 9
Beta 20 20% 4
Gamma 80 50% 40
Ave. Unit Contribution Margin 53
Sales Mix

 Average Contribution Margin Rate = CM Rate times Sales Mix Ratio

in Pesos
 Example:

Product CM Rate Sales Mix in pesos Ave. CMR

Alpha 23.08% 30/100 6.92%
Beta 15.38% 20/100 3.07%
Gamma 61.54% 50/100 30.77%
Average Contribution Margin Rate 40.76%
Sales Mix

 Average Contribution Margin Rate = Average CM/ Unit * Average

Unit Selling Price

Product USP Sales Mix Ratio Ave. USP

Alpha P100 30/100 30
Beta P60 20/100 12
Gamma P40 50/100 20
Average Unit Selling Price 62
Sales Mix

 Average Contribution Margin Rate = Average CM/ Unit * Average

Unit Selling Price

Product USP Sales Mix Ratio Ave. USP

Alpha P100 30/100 30
Beta P60 20/100 12
Gamma P40 50/100 20
Average Unit Selling Price 62

 62/53 = 1.17%
CVP Sensitivity
Analysis
CVP Sensitivity Analysis

 Sales price changes, variable cost changes, fixed cost changes,

and sales mix changes.
 Concerns about predicting the outcome of profit given the
changes in the variable affecting profit.
CVP Sensitivity Analysis
 Tarlac Company produces and sells product ABC and makes available
to you the following data:
 Unit sale price: 160
 Unit VC: 100
 Total Fixed Cost: 600,000
 Units Sold: 90,000

 What would the new CM Rate, Breakeven Pesos, and Operating Profit
be if:
 Unit sales price increase by 20%
 Unit Variable costs increase by 10%
 Total Fixed cost decrease to 450,000
 Units sold increase by 20%
 Unit sales price increases to P200, VC increase by 15%, Fixed cost increase by
5%
CVP Sensitivity Analysis

 Tarlac Company produces and  CMR: 160 – 100 = 60/160 = 37.50%

sells product ABC and makes
available to you the following
data:  BE Pesos: 600,000/37.50% = 1,600,000
 Unit sale price: 160
 Unit VC: 100  Operating profit: 60*90,000 = 5,400,000 –
 Total Fixed Cost: 600,000 600,000 = 4,800,000
 Units Sold: 90,000

 CM Rate, BE Pesos, Operating

Profit
CVP Sensitivity Analysis

 Tarlac Company produces and

sells product ABC and makes
available to you the following
data:
 Unit sale price: 160
 Unit VC: 100
 Total Fixed Cost: 600,000
 Units Sold: 90,000

 Unit sales price increase by 20%

CVP Sensitivity Analysis

 Tarlac Company produces and  CMR: 192 – 100 = 92/192 = 47.92%

sells product ABC and makes
available to you the following
data:  BE Pesos: 600,000/47.92% = 1,252,086.81
 Unit sale price: 160
 Unit VC: 100  Operating profit: 92*90,000 = 8,280,000 –
 Total Fixed Cost: 600,000 600,000 = 7,680,000
 Units Sold: 90,000

 Unit sales price increase by 20%

 From 160 to 192
CVP Sensitivity Analysis

 Tarlac Company produces and

sells product ABC and makes
available to you the following
data:
 Unit sale price: 160
 Unit VC: 100
 Total Fixed Cost: 600,000
 Units Sold: 90,000

 Unit Variable costs increase by

10%
CVP Sensitivity Analysis

 Tarlac Company produces and  CMR: 160 – 110 = 50/160 = 31.25%

sells product ABC and makes
available to you the following
data:  BE Pesos: 600,000/31.25% = 1,920,000
 Unit sale price: 160
 Unit VC: 100  Operating profit: 50*90,000 = 4,500,000 –
 Total Fixed Cost: 600,000 600,000 = 3,900,000
 Units Sold: 90,000

 Unit Variable costs increase by

10%
 From 100 to 110
CVP Sensitivity Analysis

 Tarlac Company produces and

sells product ABC and makes
available to you the following
data:
 Unit sale price: 160
 Unit VC: 100
 Total Fixed Cost: 600,000
 Units Sold: 90,000

 Total Fixed cost decrease to

450,000
CVP Sensitivity Analysis

 Tarlac Company produces and  CMR: 160 – 100 = 60/160 = 37.50%

sells product ABC and makes
available to you the following
data:  BE Pesos: 450,000/37.50% = 1,200,000
 Unit sale price: 160
 Unit VC: 100  Operating profit: 60*90,000 = 5,400,000 –
 Total Fixed Cost: 600,000 450,000 = 4,950,000
 Units Sold: 90,000

 Total Fixed cost decrease to

450,000
CVP Sensitivity Analysis

 Tarlac Company produces and

sells product ABC and makes
available to you the following
data:
 Unit sale price: 160
 Unit VC: 100
 Total Fixed Cost: 600,000
 Units Sold: 90,000

 Units sold increase by 20%

CVP Sensitivity Analysis

 Tarlac Company produces and  CMR: 160 – 100 = 60/160 = 37.50%

sells product ABC and makes
available to you the following
data:  BE Pesos: 600,000/37.50% = 1,600,000
 Unit sale price: 160
 Unit VC: 100  Operating profit: 50*108,000 = 5,400,000 –
 Total Fixed Cost: 600,000 600,000 = 4,800,000
 Units Sold: 90,000

 Units sold increase by 20%

 From 90,000 to 108,000
CVP Sensitivity Analysis

 Tarlac Company produces and

sells product ABC and makes
available to you the following
data:
 Unit sale price: 160
 Unit VC: 100
 Total Fixed Cost: 600,000
 Units Sold: 90,000

Unit sales price increases to P200, VC

increase by 15%, Fixed cost increase
by 5%
CVP Sensitivity Analysis

 Tarlac Company produces and  CMR: 200 – 115 = 85/200 = 42.50%

sells product ABC and makes
available to you the following
data:  BE Pesos: 630,000/42.50% = 1,482,353
 Unit sale price: 160
 Unit VC: 100  Operating profit: 85*90,000 = 7,650,000 –
 Total Fixed Cost: 600,000 630,000 = 7,020,000
 Units Sold: 90,000

Unit sales price increases to P200, VC

increase by 15%, Fixed cost increase
by 5%