Question

A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra? Product Unit Sales Price Variable Cost Per Unit Regular $ 20 $ 8 Ultra 24 4

Answer 1

31,000 Regular units and 62,000 Ultra units.

Step-by-step explanation:

The computation is shown below:

Regular Ultra

Selling price per unit $20 $24

Variable cost per unit $8 $4

Contribution margin per unit $12 $20

Sales mix (1 : 2) 33% 67%

Now Contribution margin

Sales mix $4 $13.33

Weighted contribution margin unit $17.33

And, the fixed cost is $1,612,000

So, the total break even units is

= $1,612,000 ÷ $17.33

= 93,000 units

So, the Regular unit sales is

= 93,000 units × 1 ÷ 3

= 31,000 units

And, the Ultra unit sales is

= 93,000 units × 2 ÷3

= 62,000 units