Question

The Greek Corporation (TGC) is considering whether launch the following 3 new products.

• Alpha
• Beta
• Gamma

Expected price and cost data for the various products are as follows.

	Alpha	Beta	Gamma
Selling price	$500	$350	$200
Variable Manufacturing Cost	$300	$200	$120
Variable Non Manufacturing Cost	$100	$50	$30

Fixed cost to manufacture all products is $90,000. The expected sales mix: for every 50 units that TGC sells, 25 units would be from selling Alpha, 15 units would be from selling Beta and 10 units would be from selling Gamma.

Assuming TGC operates in a way that is consistent with all the relevant Cost-Volume-Profit assumptions, which of the following statements about the number of units it needs to sell to break-even are true:

1. The total units it needs to sell to breakeven is exactly 1,000 units  

2. The number of units of Alpha it needs to sell to breakeven is exactly 250 units

3. The number of units of Beta it needs to sell to breakeven is exactly 300 units

4. The number of units of Gamma it needs to sell to breakeven is 112 units (rounded up to the nearest whole unit)  

Group of answer choices

Statements 1 and 2 only

Statements 1,2 and 3 only

Statements 2 and 3 only

Statements 1 and 3 only

Statement 4 only

Answer 1

1. The total units it needs to sell to breakeven is exactly 1,000 units

3. The number of units of Beta it needs to sell to breakeven is exactly 300 units

Statements 1 and 3 only is correct option

Sales mix = 25:15:10 = 5:3:2
	Alpha	Beta	Gamma
Selling price	500	350	200
Less: Variable Manufacturing Cost	300	200	120
Less: Variable Non Manufacturing Cost	100	50	30
Unit Contribution margin	100	100	50
Weighted Unit Contribution margin:
Alpha	50	=100*5/10
Beta	30	=100*3/10
Gamma	10	=50*2/10
Total	90
Fixed costs	90000
/ Weighted Unit Contribution margin	90
Break even units	1000
Break even units:
Alpha	500	=1000*5/10
Beta	300	=1000*3/10
Gamma	200	=1000*2/10