Question

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra? Product Unit Sales Price Variable Cost Per Unit Regular $20 $8 Ultra 24 4 10,333 of A and 20,667 of B. 31,000 of A and 31,000 of B. 62,000 of A and 31,000 of B. 31,000 of A and 62,000 of B. 36,167 of A and 72,333 of B.

Answer 1

Answer:

break even rate = $31000

ultra break even point  = $62000

Explanation:

given data

total fixed costs = $1,612,000

solution

WE FIND HERE FIRST contribution margin that is

contribution margin for regular per unit = $20 - $8

contribution margin = $12

and

contribution margin for ultra = $24 - $ 4

contribution margin for ultra = $20

so if 1 unit of regular is sold

2 unit of ultra will sold here

so

contribution margin is here

contribution margin = ( $12 × 1 )+  (  $12 × 2 )

contribution margin =  $52

and

break even point at commposite rate = total fix cost ÷ contribution margin rate at commposite rate

so

break even rate = $\frac{1612000}{52}$

break even rate = $31000

and

ultra break even point = 31000 × 2

ultra break even point  = $62000