Question

Assume that Crowley Co. sold 70% of Product A and 30% of Product B during the past year. The unit contribution margin for Product A is $18 and the unit contribution margin B is $26. Crowley has fixed costs of $500,000.

a) The break-even point in units is:

b) Number of Product A units sold at Break-even:

c) Number of Product B units sold at Break-even

Answer 1

Answer:

Weight of Product A = 0.70
Weight of Product B = 0.30

Contribution Margin per Unit of Product A = $18
Contribution Margin per Unit of Product B = $26

Weighted Average Contribution Margin per Unit = (0.70 * $18) + (0.30 * $26)
Weighted Average Contribution Margin per Unit = $20.40

Combined Break Even Point (Units) = Fixed Cost / Weighted Average Contribution Margin per Unit
Combined Break Even Point (Units) = $500,000 / $20.40
Combined Break Even Point (Units) = 24,510 Units

Number of Product A at Break Even Level = 24,510 * 70%
Number of Product A at Break Even Level = 17,157 Units

Number of Product B at Break Even Level = 24,510 * 30%
Number of Product B at Break Even Level = 7,353 Units