Question

EB13.

Answer 1

Answer:

Product                  Selling price   Unit variable cost

                                       $                        $

Trunk switch                  60                     28

Gas door switch            75                      33

Glove box light              40                     22

                                      175                   83

Composite contribution margin

= Composite selling price - Composite unit variable cost

= $175 - $83

= $92

Composite contribution margin ratio

= Composite contribution margin

  Composite selling price

= $92

  $175

= 0.525714285

Composite break-even point in dollars

= Fixed cost

  Composite contribution margin ratio

= $18,840

  0.525714285

=  $35,837

Explanation:

In this case, there is need to add all the selling prices to obtain composite selling price. We also need to add all the unit variable costs to derive composite unit variable cost.

Composite contribution equals composite selling price minus composite unit variable cost.

Composite contribution margin ratio is the ratio of composite contribution to composite selling price.

Composite break-even point in dollars equal fixed cost divided by composite contribution margin ratio.