Question

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $34 and $57, respectively. Corn has fixed costs of $378,000. The break-even point in units is

Answer 1

9,792.75 units

Step-by-step explanation:

The formula to compute the break even point in units is shown below:

Break even point in units = Fixed cost ÷ Weightage average Contribution margin per unit

where,

Fixed cost is $378,000

And, the Weightage average Contribution margin per unit is

= (Total contribution margin) ÷ (Total sales units)

= (8,000 units ×$34 + $2,000 × $57) ÷ (8,000 units + 2,000 units)

= ($272,000 + $114,000) ÷ (10,000 units)

= ($386,000) ÷ (10,000 units)

= $38.6 per unit

Now the break even point in units is

= $378,000 ÷ 38.6 per unit

= 9,792.75 units