Question

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $2,242,500. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?unit sales price variable cost per unitproductregular 27 $8ultra 30 $7a) 34,500 Regular units and 34,500 Ultra units.b) 34,500 Regular units and 69,000 Ultra units.c) 11,500 Regular units and 23,000 Ultra units.d) 40,250 Regular units and 80,500 Ultra units.e) 69,000 Regular units and 34,500 Ultra units.

Answer 1

Answer:

b) 34,500 Regular units and 69,000 Ultra units

Explanation:

The computation of the firm break even point in units for Regular and Ultra is shown below:

Weighted average contribution margin per unit is

= (19 × 1 ÷ 3 + 23 × 2 ÷ 3)

= 21.6666 per unit

Now Break even point unit is

= 2242500 ÷ 21.666

= 103500 unit

Now

Regular = 103500 ÷ 3 = 34500

And Ultra = 103500 - 34500 = 69000

So the correct option is b