Question

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in composite units (rounded to the nearest whole unit). Multiple Choice 858 composite units. 429 composite units. 6,161 composite units. 15,150 composite units. 7,575 composite units.

Answer 1

Answer:

858 composite units

Explanation:

$\left[\begin{array}{cccc}& CM& Unit Mix& weight& Youth&105&5&525& Adult&450&9&4,050& Recreational&500&6&3,000& Subtotal&&20&7,575&\end{array}\right]$

We have to multiply the contribution per unit for the compose of the sales mix.

105x5 =    525

450x9= 4,050

500x6= 3,000

Then we add it to get the composed unit contribution margin

7,575

Then, we calcualte the BEP using this amount

$\frac{Fixed\:Cost}{Contribution \:Margin \:MIX} = BEP\: MIX_{units}$

Fixed Cost 6,500,000

Composite Units Margin 7575

$\frac{6500000}{7575} = BEP\: MIX_{units}$

BEP 858.0858086