Question

NoFly Corporation sells three different models of a mosquito "zapper." Model A12 sells for $52 and has variable costs of $41. Model B22 sells for $109 and has variable costs of $75. Model C124 sells for $403 and has variable costs of $310. The sales mix of the three models is A12, 58%; B22, 27%; and C124, 15%. If the company has fixed costs of $194,766, how many units of each model must the company sell in order to break even? (Round Per unit values to 2 decimal palces, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.)

Answer 1

Answer:

For Model A12:

Break even point (units) = 6600 x (58/100) = 3828 units

For Model B22:

Break even point (units) = 6600 x (27/100) = 1728 units

For Model C124:

Break even point (units) = 6600 x (15/100) = 990 units

Step-by-step explanation:

A)

Calculation of total break even unit is given below:

Break Even units = \frac{fixed\ expenses}{contribution\ margin\ per\ unit}

where  contribution per unit is given as

Contribution margin per unit = selling price per unit - various expenses per unit

Therefore,

For Model A12:

Contribution margin per unit = $52 - $41 = $11

For Model B22:

Contribution margin per unit = $109 - $75 = $34

For Model C124:

Contribution margin per unit = $403 - $310 = $93

As, sales mix of given model is given as  58:27:15,

therefore total contribuition per unit is

Total contribution margin per unit = {$11 x (58/100)} + {$34 x (27/100)} + {$93 x (15/100)}

= $6.38 + $9.18 + $13.95

= $29.51

Total  break even units $= \frac{\ 195946}{\ 29.51}$

                                        = 6600 units  

(B)  Break point for each model;

For Model A12:

Break even point (units) = 6600 x (58/100) = 3828 units

For Model B22:

Break even point (units) = 6600 x (27/100) = 1728 units

For Model C124:

Break even point (units) = 6600 x (15/100) = 990 units