Question

Harding corporation sells two products, standard and supreme. expected sales are 40,000 standard and 60,000 supreme. standard's unit contribution margin is $30 and supreme's is $60. fixed expenses are $1,800,000. how many standard units would harding sell at the break-even point? 15,000 20,000 22,500 40,000

Answer 1

Contribution for Standard is $30 per unit and Supreme is $60 per unit, Thus if Fixed expenses are first divided between the two products on the basis of Contribution per unit, It can be calculated as below:

Fixed Expense Bifurcated on basis of Contribution per unit= 30:60

Which Comes to 1:2

Thus it will be bifurcated as $1200000 for Supreme and $600000 for Standard

Thus for Standard to break even it Requires to Sell the below no of units:

Break Even Point in units=$\frac{Fixed Expense}{Contribution per unit}$

Break Even Point in units=$\frac{600000}{30}$

Break even points in units=20000 units