Question

Jilly Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in units?

A)

15,000

B)

10,000

C)30,000

D)35,000

Answer 1

Product A:

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $20 - $12
Contribution Margin per unit = $8

Product B:

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $30 - $18
Contribution Margin per unit = $12

Product C:

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $40 - $24
Contribution Margin per unit = $16

Sales Mix = 3 : 2 : 1

Weighted Average Contribution Margin per unit = (3/6) * $8 + (2/6) * $12 + (1/6) * $16
Weighted Average Contribution Margin per unit = (1/6) * $64

Breakeven Point in units = Fixed Costs / Weighted Average Contribution Margin per unit
Breakeven Point in units = $320,000 / $64 * (1/6)
Breakeven Point in units = 30,000