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. a. Product QQ units b. Product ZZ units

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andromache andromache · Answer 1 · 2020-03-11T05:50:45+01:00

Answer:

a. 1,750 units

b. 2,625 units

Explanation:

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

Combined break even point = Fixed cost ÷ weighted 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 placing 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