Question

Alexis Incorporated sells two products, larges and smalls. Larges sell for $94 per unit with variable costs of $62 per unit. Smalls sell for $27 per unit with variable costs of $10 per unit. Total fixed costs for the company are $14,000. Alexis Incorporated typically sells five larges for every two smalls. What is the breakeven point in total units?

Answer 1

Answer:

The break even point is 505 units.

Explanation:

Alexis Incorporated sells two products, larges and smalls.

Larges sell for $94 per unit with variable costs of $62 per unit.

Smalls sell for $27 per unit with variable costs of $10 per unit.

Total fixed costs for the company are $14,000.

The contribution margin per unit for larges

= Sales - Variable costs

= $94 - $62

= $32

The contribution margin per unit for smalls

= Sales - Variable costs

= $27 - $10

= $17

At break even point the profits incurred is zero such that cost and revenue are equal.

$\frac{5}{7}\ \times\ 94x\ +\ \frac{2}{7}\ \times\ 27x\ =\ \frac{5}{7}\ \times 62x\ +\ \frac{2}{7}\ \times\ 10x\ +\ \ 14,000$

67.14x + 7.71x = 44.28x + 2.85x + 14,000

74.85x = 47.13x + 14,000

x = $\frac{14,000}{27.72}$

x = 505.05