Question

Handy Home sells windows and doors in the ratio of 7:3 (windows:doors). The selling price of each window is $113 and of each door is $253. The variable cost of a window is $69.00 and of a door is $181.50. Fixed costs are $469, 625.
1. Determine the selling price per composite unit.
2. Determine the variable costs per composite unit.
3. Determine the break-even point in composite units.
4. Determine the number of units of each product that will be sold at the break-even point.

Answer 1

Answer and Explanation:

The computation is shown below:

1. The selling price per unit is

Particulars   Quantity    Selling price   Total per composite unit

                                      per unit

Windows       7               $113                  $791

Doors            3               $253                $759

Total                                                        $1,550

2. The variable cost per unit is

Particulars   Quantity  Variable cost   Total per composite unit

                                      per unit

Windows       7               $69                  $483

Doors            3               $181.50             $544.50

Total                                                         $1,027.50

The contribution margin per unit is

= Selling price - variable cost

= $1,550 - $1,027.50

= $522.50

3. The break even point is

= Fixed cost ÷ contribution margin per unit

= $469,625 ÷ $522.50

= 898.80 units

4. The number of unit is

Particulars   Quantity  Variable cost   Total per composite unit

                                      per unit

Windows       7               $898.80            $6,291.60

Doors            3               $898.80            $2,694.40

Total                                                         $8,988