Question

Vaughn Manufacturing has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Vaughn are 60000 Standard and 40000 Supreme. Fixed expenses are $1500000. How many Standards would Vaughn sell at the break-even point?

a) 50000
b) 60000
c) 30000
d) 20000

Answer 1

Standard= 30,000 units

Step-by-step explanation:

First, we will determine the sales proportion for each product:

Standard= 60,000/100,000= 0.6

Supreme= 40,000/100,000= 0.4

Now, we calculate the break-even point in units for the whole company:

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

Break-even point (units)= 1,500,000 / 30

Break-even point (units)= 50,000

Finally, the units to be sold for Standard:

Standard= 50,000*0.6

Standard= 30,000 units