Question

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. Product Selling Price per Unit Variable Cost per Unit Contribution Margin per Unit X $180 $100 $80 Y 100 60 40 The sales mix for product X and Y is 60% and 40%, respectively. Determine the break-even point in units of X and Y. Round answer to nearest whole number. units

Answer 1

Answer:

1,500 units; 1,000 units

Explanation:

Break Even Point (in units) = Fixed cost ÷ Contribution margin per unit

Fixed cost = $160,000

Sales Mix = 60% of X + 40% of Y

                = 0.6X + 0.4Y

So,

Contribution Margin of the Mix:

= (60% × contribution margin of X) + (40% × contribution margin of Y )

Contribution Margin of the Mix per unit:

= (60% × 80) + (40% × 40)

= 48 + 16

= $64

Break Even Point (in units) = Fixed cost ÷ Contribution margin per unit  

                                            = 160,000 ÷ 64

                                            = 2,500 unit

At the Level of break even :

Unit of X at break-even:

= 60% of 2,500

= 1,500 units

Unit of Y at break-even:

= 40% of 2,500

= 1,000 units