Question

Calico Corporation makes the following products:

	Budgeted Sales	Unit Contribution Margin
Cotton cloth	1,500,000 yds.	$.80
Wool cloth	1,000,000 yds.	$.75

Budgeted fixed costs are $1,560,000.  The break-even point in total yards is:

Answer 1

Break even point mean This is the level of activity there is neither a profit or loss, in another way Break even point is the point at which total revenue is equal to total cost incurred for a product

Break even point ( in no of units/yards). = Fixed cost/ contribution per unit/ yard

Contribution per yard

Cotton cloth is $80

Wool cloth is $75

Assuming that fixed cost for both department is same

Break even point

For cotton cloth is = $1,560,000/$80= 19,500 yards

For wool cloth is = $1,560,000/$75=20,800 yards