Question

Carol O’Connon has recently left her job as a florist at a grocery store chain to start her own business, Carol’s Floral Delivery. She is trying to determine her break-even point. She plans to sells two types of flower arrangements. Based on her research, she is projecting the sales mix to be 60% basic flower arrangements and 40% deluxe flower arrangements. Basic arrangements have a variable cost per unit of $11.4 and a selling price of $25.08. Deluxe arrangements have a variable cost per unit of $19.38 and a selling price of $45.6. Her fixed costs are $14514. How many basic arrangements would she have to sell to break-even?

776

1061

466

595

Answer 1

Answer- Units of basic arrangements sell to break-even = 466 units.

Explanation- Units of each product sold at break-even – Basic flower arrangements = 776 units*60%

= 466 units

Where- Contribution margin per unit = Selling price per unit-Variable cost per unit

Basic flower arrangements = $25.08 per unit - $11.40 per unit

= $13.68 per unit

Deluxe flower arrangements = $45.60 per unit - $19.38 per unit

= $26.22 per unit

Where- Weighted average contribution margin per unit =Contribution margin per unit* Sales mix percentage

= ($13.68 per unit*60%) + ($26.22 per unit*40%)

= $8.208 per unit+$10.488 per unit

= $18.696 per unit

Where- Units sold to breakeven = Fixed costs/ Weighted average contribution margin per unit

= $14514/$18.696 per unit

= 776 units