Question

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is a. 6,300 units b. 10,500 units c. 8,000 units d. 12,600 units

Answer 1

The answer is B. 10,500units

Break even unit = Fixed cost / weighted average contribution per unit

weighted average contributiion per unit

= {( $30*8000) + ( $60*2000)}/ 10,000

= $360,000/10,000

= $36

Break even unit = $378,000/$36 = 10500

Step-by-step explanation:

Answer 2

The correct answer is (b) 10,500 units

Step-by-step explanation:

Solution

Recall that,

The weighted contribution average margin per unit is computed below:

Weighted average contribution margin = The Total contribution margin/Total sold units

Thus,

(8,000 * $30 + (2000 * $60)/ 8000 + 2000

which is

$ 360,000/10,000 = $ 36 per unit.

Now,

We calculate for the break even points in unit

Break-even units Fixed costs / Weighted average contribution margin

$378,000./$ 36 = 10, 500 units

Therefore the break even point is 10, 500 units