Question

Edgewater Enterprises manufactures two products. Information follows: Product A Product B Sales price $ 13.50 $ 16.75 Variable cost per unit $ 6.15 $ 6.85 Product mix 40% 60% Calculate the break-even point if Edgewater’s total fixed costs are $230,000. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)

Answer 1

Answer:

The break-even point is $25,900 units

Explanation:

In this question we use the formula of break-even point in unit sales which is shown below:

= (Fixed expenses) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit for product A = (Selling price per unit - Variable cost per unit) ×product mix

= ($13.50 - $6.15) × 40%

= $2.94

Contribution margin per unit for product B = (Selling price per unit - Variable cost per unit) ×product mix

= ($16.75 - $6.85) × 60%

= $5.94

So, the total contribution margin would be equal to

= $2.94 + $5.94

= $8.88

And, the fixed cost is $230,000

Now put these values to the above formula

So, the value would be equal to

= $230,000 ÷ $8.88

= $25,900 units