Megan Company has fixed costs of $747,040. 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
Yankee $310 $140 $170
Zoro 500 340 160

The sales mix for products Yankee and Zoro is 10% and 90%, respectively. Determine the break-even point in units of Yankee and Zoro.

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-10-08T02:27:21+02:00

Answer:

Yankee= 464

Zoro= 4,176

Explanation:

To calculate the break-even point in units, 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= 170*0.1 + 160*0.9

Weighted average contribution margin= $161

Break-even point (units)= 747,040 / 161

Break-even point (units)= 4,640 units

Now, for each product:

Yankee= 4,640*0.1= 464

Zoro= 4,640*0.9= 4,176