Question

Ahmed & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows: Unit selling price: Plain - $ 20.00, Fancy - $ 35.00 Variable cost per unit: Plain - 12.00, Fancy - 24.50 Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000. 1) The weighted-average unit contribution margin is: (Round intermediate calculations and final answer to 2 decimal places):
a) $6.60.
b) $2.40.
c) $14.60.
d) $6.85.
e) an amount other than those above.

2) Assuming that the sales mix remains constant, the total number of units that Jamal must sell to break even is: (Round intermediate calculations to 2 decimal places and final answer to a nearest whole number):
a) 4,147.
b) 6,500.
c) 3,932.
d) 6,237
e) an amount other than those above.

Answer 1

Answer:

1. Option (e) is correct.

2. Option (e) is correct.

Explanation:

(a) Weighted-average unit contribution margin:

= (Unit selling price of plain - plain's variable cost) × 60% + (Unit selling price of fancy - fancy's variable cost) × 40%

= (20 - 12) × 60% + (35 - 24.50) × 40%

= $4.8 + $4.2

= $9

(b) Break even sales:

= Annual fixed expenses ÷ Weighted-average unit contribution margin

= 45,000 ÷ 9

= 5,000