Question

At XYZ Company, two products are produced as follows: Larges sell for $94 per unit with variable costs of $60 per unit. Medium sell for $35 per unit with variable costs of $15 per unit. Total fixed costs for the company are $12,000. XYZ company typically sells five larges for every four medium. What is the breakeven point in total units?

Answer 1

	Larges	Medium
Selling price per unit	94	35
Variable cost per unit	-60	-15
Contribution margin per unit	34	20

Sales mix = Large:Medium

= 5:4

Weighted average contribution margin per unit = Contribution margin per unit of larges x 5/9 + Contribution margin per unit of Medium x 4/9

= 34 x 5/9 + 20 x 4/9

= 18.89+8.89

= 27.78

Break even point = Fixed cost/ Weighted average contribution margin per unit

= 12,000/27.78

= 432 units

The breakeven point in total units = 432 units

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