Question

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:______

Product Unit Sales Price Variable Cost Per Unit
Regular $20 $8
Ultra 24 4
a. 62,000 of A and 31,000 of B.
b. 31,000 of A and 62,000 of B.
c. 10,333 of A and 20,667 of B.
d. 31,000 of A and 31,000 of B.
e. 36,167 of A and 72,333 of B.

Answer 1

Instructions are below.

Step-by-step explanation:

Giving the following information:

Sales proportion:

Regulas= 1/3= 0.33

Ultra= 2/3= 0.67

Fixed costs= $1,612,000.

Product Unit Sales Price Variable Cost Per Unit

Regular $20 $8

Ultra 24 4

To calculate the contribution margin per composite unit, we need to use the following formula:

Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)

weighted average selling price= (0.33*20) + (0.67*24)

weighted average selling price= $22.68

weighted average unitary variable cost= (0.33*8) + (0.67*4)

weighted average unitary variable cost= $5.32

Weighted average contribution margin= 22.68 - 5.32

Weighted average contribution margin= $17.36

Now, we can calculate the break-even point for the company as a whole:

Break-even point (units)= Total fixed costs / Weighted average contribution margin

Break-even point (units)= 1,612,000/17.36= 92,857

Finally, for each product:

Regular= 92,857*0.33= 30,643

Ultra= 92,857*0.67= 62,214