Question

Sales Mix and Break-Even Analysis

Michael Company has fixed costs of $500,240. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:

Product	Selling Price		Variable Cost per Unit			Contribution Margin per Unit
QQ	$570		$330			$240
ZZ	310		240			70

The sales mix for Products QQ and ZZ is 20% and 80%, respectively. Determine the break-even point in units of QQ and ZZ. If required, round your answers to the nearest whole number.

a. Product QQ units

b. Product ZZ units

Answer 1

	product mix percentage	Contribution margin per unit	weighted average contribution margin
QQ	20%	$               240	$240*20% = $48
ZZ	80%	$                  70	$70*80% = $56
Weighted average contribution margin			$                        104

Total Break even sales in units = $500,240/$104 = 4,810 units

	Sales Mix	Total Break even sales in units	Break even units
QQ	20%	4810	962
ZZ	80%	4810	3848