Question

Edgewater Enterprises manufactures two products. Information follows:     

	Product A			Product B
Sales price	$	13.50		$	17.20
Variable cost per unit	$	6.75		$	7.75
Product mix		40%			60%

Calculate the break-even point if Edgewater’s total fixed costs are $247,000. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)

Answer 1

Contribution margin per unit = Sales price per unit - Variable cost per unit

	Product A	Product B
Contribution margin per unit	$6.75 ($13.5-$6.75)	$9.45 ($17.2-$7.75)

Weighted average contribution per unit = (Product A contribution margin per unit * Sales mix) + (Product B contribution margin per unit * Sales mix)

= ($6.75 * 40%) + ($9.45 * 60%)

= $2.7 + $5.67

= $8.37

Break-even point = Fixed costs / Weighted average contribution per unit

= $247,000 / $8.37

= 29,510 units