Question

Henry Industries sells two products, Basic models and Deluxe models. Basic models sell for $42 per unit with variable costs of $30 per unit. Deluxe models sell for $50 per unit with variable costs of $40 per unit. Total fixed costs for the company are $75,400. Henry Industries typically sells four Basic models for every Deluxe model. What is the breakeven point in total units

Answer 1

Break-even point= 6,500 units

Step-by-step explanation:

The break-even point (BEP) is the quantity of each product to be sold such that the business makes no profit or loss.

The beak-even point can be determined as follows:

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

Contribution per unit = selling price - variable cost

Contribution per unit:

Basic model = 42-30 = 12

Deluxe model = 50-40 = 10

Average contribution = ( 12×4) + (10×1)/(4+1)= 11.6

Break-even point = 75,400/11.6=6500

Break-even point =6,500 units