Question

Helpful Hardware sells windows (80% of sales) and doors (20% of sales). The selling price of each window is $440 and of each door is $1,040. The variable cost of each window is $280 and of each door is $740. Fixed costs are $1,505,880. The break-even point in units using the weighted-average contribution margin is___

Answer 1

To find the break-even point in units, calculate the contribution margin for each product, determine the weighted-average contribution margin, and then divide the fixed costs by this average. For Helpful Hardware, the break-even point is 8,010 units.

Step-by-step explanation:

To calculate the break-even point in units using the weighted-average contribution margin, we must follow several steps. First, we need to calculate the contribution margin for each product (the selling price minus the variable cost). For windows, it's $440 - $280 = $160. For doors, it's $1,040 - $740 = $300.

Next, we determine the weighted-average contribution margin. Since windows make up 80% of sales and doors 20%, the weighted-average contribution margin is (0.8 × $160) + (0.2 × $300) = $128 + $60 = $188.

Lastly, we divide the total fixed costs by the weighted-average contribution margin to find the break-even point: $1,505,880 ÷ $188 = 8,010 units (rounded to the nearest whole number).