Question

Gabe Industries sells two​ products, Basic models and Deluxe models. Basic models sell for​ $41 per unit with variable costs of​ $15 per unit. Deluxe models sell for​ $45 per unit with variable costs of​ $45 per unit. Total fixed costs for the company are​ $1,310.40. Gabe Industries typically sells four Basic models for every Deluxe model. What is the breakeven point in total​ units?

a. 50 unitsb. 63 units.c. 29 units.d.32 units

Answer 1

b. 63 units

Explanation:

The breakeven point occurs when the revenue is equal to the expenses. It means that the profit is 0. So, for the Basic model, the revenue is the sell less the costs: $41 - $15 = $26.For the Deluxe model, the revenue per unit is 0 ($45 - $45).

So, calling x the Basic model units, ad y the Deluxe model units, the total revenue will be: 26x, which must be equal to the expenses = $1,310.40:

26x = 1310.40

x = 50.4 units

y = x/4, because for 1 Deluxe model four Basic models are selled.

y = 50.4/4 = 12.6 units

The total units for breakeven point is 50.4 + 12.6 = 63 units.