Answer:
1. Regular model 25,000 units
Deluxe model 4,477.61 units
2. $9,656,000
Explanation:
1. Computation of the number of regular models and deluxe models that must be sold to break even.
First step is to calculate the contribution margin
per unit for Regular model and Deluxe model using this formula
Contribution margin per unit = Contribution margin / Units sold
Let plug in the formula
Regular model Contribution margin per unit= $4,800,000 / 100,000
Regular model Contribution margin per unit=$48.00 per unit
Deluxe model Contribution margin per unit= $4,288,000 / 20,000
Deluxe model Contribution margin per unit= $214.40 per unit
Now let calculate the Break even point in units for Regular model and Deluxe model using this formula
Break even point in units = Direct fixed cost / Contribution margin per unit
Let plug in the formula
Regular model Break even point in units= $1,200,000 / $48
Regular model Break even point in units=25,000 units
Deluxe model Break even point in units= $960,000 / $214.40
Deluxe model Break even point in units =4,477.61 units
Therefore Break even point in units will be: Regular model 25,000 units
Deluxe model 4,477.61 units
2. Computation of the sales revenue that must be generated for the company to break even
First step is to calculate Contribution margin ratio using this formula
Contribution margin ratio = Contribution margin / Sales * 100
Let plug in the formula
Contribution margin ratio =$9,088,000 / $22,720,000 * 100
Contribution margin ratio =40%
Second step is to calculate the Total fixed expenses for the company using this formula
Total fixed expenses for the company = Total direct fixed costs + Common fixed costs
Let plug in the formula
Total fixed expenses for the company =$2,160,000 + 1,702,400
Total fixed expenses for the company =$3,862,400
Now let calculate the Break even point in dollar sales using this formula
Break even point in dollar sales = Total fixed cost / Contribution margin ratio
Let plug in the formula
Break even point in dollar sales=3,862,400 / 40%
Break even point in dollar sales=$9,656,000
Therefore Break even point in dollar sales will be $9,656,000
