Question

Sales Mix and Break-Even Analysis Einhorn Company has fixed costs of $105,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company’s two products follow: Product Selling Price Variable Cost per Unit Contribution Margin per Unit QQ $50 $35 $15 ZZ 60 30 30 The sales mix for products QQ and ZZ is 40% and 60%, respectively. Determine the break-even point in units of QQ and ZZ.

Answer 1

Answer:

The break-even point in units of QQ and ZZ is 1,750 units and 2,625 units respectively

Explanation:

In this question, we use the combined break even point which is shown below:

Combined break even point = Fixed cost ÷ weighatge contribution margin per unit

where,

Weighted  contribution margin per unit = $15 × 40% + $30 × 60%

= $6 + $18

= $24

And, the fixed cost is $105,000

Now put these values to the above formula  

So, the value would equal to

= $105,000 ÷ $24

= 4,375 units

For products QQ = 4,375 units × 40% = 1,750 units

For product ZZ = 4,375 units × 60% = 2,625 units