Question

Baker Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units

Answer 1

30,000 units

Step-by-step explanation:

The break-even point is the units of the products that must be produced and sold to make the total costs to be equal to the total revenue.

Beak-even point can be determined as follows:

Break-even point = total fixed cost / average contribution per unit

Break-even point (units ) = $105,000/125 per unit

average contribution per unit

= contribution from a mix /total units

=(3×( 20-12) + 2×(30- 18) + 1× (40-24))/(3+2+1)

=$10.667 per unit

Break-even point (units

= $320,00/10.66

=30000

Answer 2

$5,000

Step-by-step explanation:

3 units of A at ($20-$12) contribution margin per unit = $24

2 units of B at ($30-$18) contribution margin per unit =24

1 unit of C at ($40-$24) contribution margin per unit = 16

contribution margin of a composite unit (sum) = $64

Break even point in composite units=$320,000/$64= $5,000

Therefore the break-even point in composite units is $5,000