Question

Conley Company has fixed costs of $17,802,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company’s two products follow: Product Model Selling Price Variable Cost per Unit Contribution Margin per Unit Yankee $180 $99 $81 Zoro 225 135 90

The sales mix for products Model 94 and Model 81 is 75% and 25%, respectively. Determine the break-even point in units of Model 94 and Model 81. If required, round your answers to the nearest whole number.

a. Product Model 94 units

b. Product Model 81 units

Answer 1

Break-even point:

a. Product Model 94 units = 160,378.38 units

b. Product Model 81 units= 53,459.46 units

Step-by-step explanation:

The break even point in units is the minimum units of each of the two products that Conley Company should sell in order for it to make no profit or loss.

At this units of sales, the sales revenue would produce a total contribution exactly equal to the fixed cost of $17,802,000.

The beak-even point (total units) = Total fixed cost / average contribution per unitAverage average contribution per unit = ( 81× 75%) + (90× 25%) = $83.25

Break-even point = $17,802,000/83.25 = 213,837.84 units

Product Model unit = 75%× 213,837.84 units

= 160,378.38 units

Product Model 81 units = 25% × 213,837.84

= 53,459.46 units