Question

Handy Home sells windows and doors in the ratio of 7:3 (windows:doors). The selling price of each window is $111 and of each door is $261. The variable cost of a window is $68.00 and of a door is $180.50. Fixed costs are $515,375. (Enter your "per unit" values in two decimal places.)1. Determine the selling price per composite unit 2. Determine the variable costs per composite unit 2. Determine the break-even point in composite unit

Answer 1

1.

Selling Price $156

2.

Variable cost $101.25

Break-even 9,500 units and $1,482,000

Step-by-step explanation:

Compposit unit unit is a unit made according to the propostion to sale. Different products are combined to make a sales mix for composit unit.

1.

Selling price per composit unit = [ ( 7 x 111 ) + ( 3 x 261 ) ] / 10 = 1560 / 10 = $156

2.

Variable cost per composit unit = [ ( 7 x 68 ) + ( 3 x 180.5 ) ] / 10 = 1,017.5 / 10 = $101.75

Contribution per composit unit = Selling Price - variable cost = $156 - 101.75 = $54.25

Break-even Point = Total Fixed cost / Contribution per unit = $515,375 / 54.25 = 9,500 units

Break-even Point ($ value )= 9,500 x 156 = $1,482,000