Point of breakeven in units: = 22,500 units
<h3>Why is it important to know what a break-even point is?</h3>
The point at which a business's total revenue equals its total expenses is known as the breakeven point. This translates to net zero just at the breakeven point, which means there is no profit.
<h3>According to the given information:</h3>
Standard Deluxe Total
Units sold 225,000 25,000
Sales mix 9 1
Contribution margin per unit $10 $20
Weighted average
contribution margin per unit $90 $20 $110
Standard Deluxe Total
Units sold 225,000 25,000
Revenues $5,625,000 $1,125,000
(225,000*$25) (25,000*$45) $6,750,000
Variable costs 3,375,000 625,000
(225,000*$15) (25,000*$25) 4,000,000
Contribution margin 2,250,000 500,000 2,750,000
Fixed costs 2,475,000
Operating income $275,000
Point of breakeven in units: $2,475,000 / $110 = 22,500 units
Breakeven point in units is higher in requirement 1 than in requirement 3 due to standard's 9-fold higher sales mix in requirement 3 compared to standard's 4-fold higher sales mix in requirement 1.
Due to the lower per unit contribution margin for standard than deluxe, requirement 3's operating income was lower than requirement 1's.
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