Question

The honey Co. sells two types of honey, flower and maple. The company projected the following cost information for the two products: Flower Maple Unit selling price $ 250 $ 120 Unit variable cost $ 110 $ 80 Number of units produced and sold 4,000 6,000 The company's total fixed costs are expected to be $280,000. Based on this information, what is the combined number of units of the two products that would be required to break even with the projected sales mix

Answer 1

Answer:

Break-even point (units)= 3,500 units

Explanation:

Giving the following information:

Flower Maple

Unit selling price $ 250 $ 120

Unit variable cost $ 110 $ 80

Number of units produced and sold 4,000 6,000

The company's total fixed costs are expected to be $280,000.

First, we need to calculate the sales proportion:

Flower= 4,000 / 10,000= 0.4

Maple= 6,000 / 10,000= 0.6

Now, to calculate the break-even point, we need to use the following formula:

Break-even point (units)= Total fixed costs / Weighted average contribution margin

Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)

Weighted average contribution margin= (0.4*250 + 0.6*120) - (0.4*110 + 0.6*80)

Weighted average contribution margin= 80

Break-even point (units)= 280,000 / 80

Break-even point (units)= 3,500 units