Question

Kyle Manufacturing produces two types of products - Card Games and Puzzles. The following information is available related to each product: Card Games Puzzles Sales price per unit $6.00 $15.00 Variable costs per unit 2.00 3.50 60% of the products sold are Card Games and 40% are Puzzles (3:2). Refer to the Kyle Manufacturing information above. If total fixed costs are $24,500, how many Puzzles need to be sold in order for the company to break-even?

Answer 1

Sale Price per Unit:

Card Games = $6.00

Puzzles = $15.00

Variable Costs per Unit:

Card Games = $2.00

Puzzles = $3.50

Products sold ratio (3:2)

Total Fixed Costs: $24,500

Profit = Selling Price of each product - Cost Price of each product - Fixed Price

if SC & SP are the sold quantities of Card Games & Puzzles respectively then,

Profit = (6 x SC) + (15 x SP) - (2 x SC) - (3.5 x SP) - 24,500

Taking Profit = 0 to calculate break-even,

0 = SC (6-2) + SP (15-3.5) -24,500

According to the given ratio:

`(SC)/(SP) = (3)/(2)\\ SC = (3)/(2) * SP`

Substituting the value of SC in terms of SP to above equation:

0 = (3/2)SP (6-2) + SP (15-3.5) -24,500

24,500 = (3/2)SP (4) + SP (11.5)

24,500 = SP(6 +11.5)

(24,500/17.5) = SP

SP = 1400

1,400 Puzzles need to be Sold in order for the company to break-even.