Question

Wall-E makes 2 products, frames and hangers. Frames have a contribution margin per unit of $6.00 and hanger has a contribution margin per unit of $11.00. Wall-E has annual fixed costs of $290,000 units. Assume that frames and hangers are sold in a 3:1 mix (3 frames are sold for each hanger). How many units of each must be sold to break-even

Answer 1

Answer:

Break-even point (units)=40,000 units

Explanation:

Giving the following information:

Frames have a contribution margin per unit of $6.00 and hanger has a contribution margin per unit of $11.00. Wall-E has annual fixed costs of $290,000 units.

We need to calculate the break-even point in units for the whole company.

Break-even point (units)= Total fixed costs / Weighted average contribution margin ratio

Weighted average contribution margin ratio= (6*0.75) + (11*0.25)

Weighted average contribution margin ratio= 7.25

Break-even point (units)= 290,000/7.25

Break-even point (units)=40,000 units