Question

Crane Company sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $30 and a selling price of $90. Q-Drive Plus has variable costs per unit of $45 and a selling price of $135. Crane’s fixed costs are $486000. How many units of Q-Drive would be sold at the break-even point?

Answer 1

1,800 units

Step-by-step explanation:

With regards to the above, we need to find first the contribution margin of Q drive.

Contribution margin of Q drive = Selling price - Variable costs per unit

= $90 - $30

= $60

We will also find contribution margin of Q drive plus

Contribution margin of Q drive plus = Selling price - Variable costs per unit

= $135 - $45

= $90

Therefore, the combine contribution margin for both drive

= 30% × $60 + 70% × $90

= $18 + $63

= $81

The next step is to find the total break even point

= Crane company's fixed costs / Combined contribution margin

= $486,000 / $81

= 6,000 units

Furthermore, it means that Q drive would be sold at the break even point = Total break even point × Sales mix

= 6,000 × 30%

= 1,800 units