Question

NoFly Corporation sells three different models of a mosquito "zapper." Model A12 sells for $61 and has variable costs of $43. Model B22 sells for $108 and has variable costs of $78. Model C124 sells for $413 and has variable costs of $316. The sales mix of the three models is A12, 56%; B22, 27%; and C124, 17%. If the company has fixed costs of $249,624, how many units of each model must the company sell in order to break even? (Round Per unit values to 2 decimal palces, e.g. 15.25 and final answers to 0 decimal places, e.g. 5,275.) Model A12 Enter a number of units rounded to 0 decimal places B22 Enter a number of units rounded to 0 decimal places C124 Enter a number of units rounded to 0 decimal places Total break-even Enter the total break-even in units rounded to 0 decimal places units

Answer 1

See explanation

Step-by-step explanation:

We first calculate weighted avg total break even point.

The formula or this is,

Total Break even = Total fixed costs / Weighted avg contribution

Weighted avg contribution = (Contribution of A12 * Weight of A12) + (Contribution of B22 * Weight of B22) + (Contribution of C124 * Weight of C124)

Contribution/ Product =

A12 = 61 - 43 = $18

B22 = 108 - 78 = $30

C124 = 413 - 316 = $97

Thus,

Weighted avg Contribution = (18*0.56) + (30*0.27) + (97*0.17) = $34.67

Total Break even = 249624/ 34.67 = 10085 units in total

Simply multiply total break even units with each products weight to calculate qty for each product to b produced.

A12 = 10085*0.56 = 5647.6 units

B22 = 10085*0.27 = 2722.94 units

C124 = 10085*0.17 = 1714.45 units

as per the sales mix.

We can also calculate how many units of each individual product are required for break even as,

A12 = 249624/18 = 13868 units

B22 = 249624/30 = 8320.8 units

C124 = 249624/97 = 2573.44 units

Hope that helps.