Question

Swifty Corporation sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. Swifty’s fixed costs are $850500. How many units of Q-Drive would be sold at the break-even point?

Answer 1

Answer:

The 3,448 units of Q-Drive would be required to sold at the break-even point.

Explanation:

For computing the how many units is to be sold at the break even point, first we have to calculate the contribution margin after that break even point is to be calculated, and than finally sale units is calculated.

1. Contribution : The contribution margin is a difference between selling price and variable cost per unit.

In mathematically,

Contribution margin = Selling price - variable cost per unit

So, for Q Drive, the contribution margin will be

= $150 - $90 = $60 per unit

Hence, the contribution margin for Q Drive is $60 per unit

Now, for Q Drive Plus , the contribution margin will be

= $195 - $105 = $80 per unit

Hence, the contribution margin for Q Drive Plus is $80 per unit      

Now, the break even point is

=  Fixed cost ÷ Total contribution margin

where,

Total contribution margin =  sales mix 30% of contribution margin for Q Drive +sales mix 70 % of contribution margin for Q Drive Plus  

=  30% × $60 + 70% × $80 = $74 per unit

Hence, the total contribution margin is $74 per unit

So, break even point is $850,500 ÷ $74 per unit = 114,93 units

So, sale value of units = 30% sales mix of break even point

                                     = 30% × 114,93 units

                                     = 3,448 units.

Thus, the 3,448 units of Q-Drive would be required to sold at the break-even point.