Question

A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,947,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?

Answer 1

the firm must sell 37,443 units of Regular and 74,886 units of Ultra

Step-by-step explanation:

Regular - unit sales price= $20; Variables costs per unit = $8

Ultra - unit sales price= $24; Variables costs per unit = $4

combined contribution margin:

• 1 unit of regular = $20 - $8 = $12
• 2 units of ultra = $48 - $8 = $40
• total = $52

break even point = total fixed costs / combined contribution margin = $1,947,000 / $52 = 37,442.31 ≈ 37,443 units

the firm must sell 37,443 units of Regular and 74,886 units of Ultra