Final answer:
The breakeven point for Mayfield Company, which sells Blue and Plaid models, is 954 total units when combining the contribution margins of both products.
Step-by-step explanation:
calculate the breakeven point in total units for Mayfield Company, which sells two different models of products, we must first determine the contribution margin per unit for each product. The Blue models have a selling price of $43 and variable costs of $30, leading to a contribution margin of $13 per unit. The Plaid models have a selling price of $52 and variable costs of $45, resulting in a contribution margin of $7 per unit.
Since four Blue models are sold for every five Plaid models, we can find the combined contribution margin per each bundle of nine units (4 Blues and 5 Plaids). The total contribution margin for four Blue models is 4 units × $13/unit = $52, and for five Plaid models is 5 units × $7/unit = $35. Adding these together gives us a total contribution margin of $87 for every nine units sold.
To find the breakeven point, we divide the total fixed costs by the combined contribution margin per bundle of nine units: $9200 ÷ $87/bundle ≈ 105.75 bundles. Since we cannot sell a fraction of a bundle, we round up to 106 bundles. This results in 106 bundles × 9 units/bundle = 954 total units required to breakeven.
Summary
The breakeven point for Mayfield Company is 954 total units, consisting of a mix of four Blue models for every five Plaid models, to cover the total fixed costs of $9200.