Question

Warner Company has $196,000 of total fixed costs and sells products A and B with a product mix of 40% A and 60% B. Selling prices and variable costs for A and B result in contribution margins per unit of $8 and $4, respectively. Compute the break-even point. Enter product mix answers in decimal form. Round weighted average unit contribution margin to two decimal places, if applicable.

Answer 1

The break-even point of Warner Company is 3,500 units.

Here, we are going to calculate the break-even point of Warner Company.

Product Product Mix   Contribution margin     Weighted Average unit

                     [1]                      per unit[2}                contribution margin[1*2]

A                40%                          $8                                     $3.2

B                60%                          $4                                     $2.4

Total                                                                                     $5,6

• Formula for Break Even point is Fixed cost / Weighted average unit contribution margin

Break-even point = $196,000 / $5,6

Break-even point = 3,500 units

Therefore, the break-even point of Warner Company is 3,500 units.

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