Answer:
Break-even point= 114943 units
Product A: 77012 units
Product B: 37931 units
Explanation:
Giving the following information:
David Company has plans to produce:
Product A: 100,000 units.
Product B: 200,000 units.
Sales revenue:
Product A= 100,000*1.20= $120,000
Product B= 200,000*0.40= $80,000
Total= $200,000
Varable expense=
Product A= 0.60*100,000= $60,000
Prodcut B= 0.30*200,000= $60,000
Total= $120,000
Contribution Margin= $80,000
Fixed costs= $50,000
Net Income= $30,000
The formula of the break-even point with multiple products is:
Break-even point= Total fixed costs/ (weighted average selling price/ weighted average variable expenses)
First, we have to calculate the sales percentage of individual products in the total sales mix.
Total sales= 300,000 units
A: 200,000/300,000= 0.67
B:100,000/300,000=0.33
Weighted average selling price= (Sale price of product A × Sales percentage of product A) + (Sale price of product B × Sale percentage of product B)= (1.20*0.67)+(0.40*0.33)= $0.936
Weighted average variable expenses= (Variable costs of product A × Sales percentage of product A) + (Variable costs of product B × Variable expenses of product B)= (0.60*0.67) + (0.30*0.33) = $0.501
Now, we can calculate the break-even point:
Break-even point= 50,000/(0.936-0.501)= 114943 units
Product A: 0.67*114943= 77012 units
Product B: 0.33*114943= 37931 units
