Question

Heyden Company has fixed costs of $705,600. 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	$700		$460			$240
ZZ	380		260			120

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

Given Data :-

Particulares	QQ	ZZ
Selling Price / unit	700	380
Less : Varaible Cost / Unit	(460)	(260)
Contribution Margin / Unit	240	120

Now let the total number of the products produced be in ratio 'x' ( both QQ and ZZ)

Now the mix is 20%:80% for QQ and ZZ respectively

so its in ratio 2:8

So therefore

total No. of QQ units = 2*x = 2x

Total No. of ZZ units = 8*x = 8x

We know that ,

At Break Even Point ,

Total Contribution = Total Fixed Cost

Therefore ,

2x * Contribution / unit of QQ + 8x* Contribution / unit of ZZ = Total Fixed Cost (Given )

(2x * 240 ) + (8x*120) = 705600

480x+960x=705600

1440x=705600

x=490

a. So Total Number of QQ Units - 2*490 = 980 units

b. Total Number of ZZ Units - 8*490 = 3920 units