Question

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

Answer 1

1,350 units

Step-by-step explanation:

The computation of the break-even point in composite units is shown below;

Composition contribution margin per unit is

= ($75 - $35) × 5 + ($95 - $40) × 2

= 310

Now break-even point in composite units is

= Fixed cost ÷ Composition contribution margin per unit

= $418,500 ÷ 310

= 1,350 units