Question

A company sells three different products: Product A, Product B, and Product C. The contribution margin per unit for each of the products is as follows: $30 for Product A, $50 for Product B, and $60 for Product C. The company’s sales mix in units is as follows: 50% Product A, 30% Product B, and 20% Product C. The company’s fixed costs amount to $1,680,000. How many units of each product must the company sell in order to break even?

Answer 1

	Products
	A	B	C
Contribution Margin Per Unit (a)	$30	$50	$60
Sales Mix (b)	50%	30%	20%
Total Contribution Margin Per unit (a * b)	$15	$15	$12	$42
Total Fixed Costs (c )	$1,680,000
Total Contribution Margin Per Unit (d)	$42
Total Break-even point in units (c / d)	40,000
Sales Mix	50%	30%	20%
Break-even point in units (40,000*50/100); (40,000*30/100); (40,000*20/100)	20,000	12,000	8,000

Therefore, the break-even point in units for Product A is 20,000, Product B is 12,000 and Product C is 8,000 units.