Question

Sales Mix and Break-Even Analysis

Michael Company has fixed costs of $1,021,330. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.

Product |
Selling
Price |
Variable
Cost per Unit |
Contribution Margin per Unit |
||||||

Q | $440 | $240 | $200 | ||||||

Z | 560 | 500 | 60 |

The sales mix for products Q and Z is 35% and 65%, respectively.

**Determine the break-even point in units of Q and
Z.**

If required, round your answers to the nearest whole number.

**Please label the break even point for Q and Z
clearly.**

Answer #1

Weighted Average of Contribution Margin = Contribution Margin
unit of Q*35% + Contribution Margin unit of Z*65%

Weighted Average of Contribution Margin = $200*35% + $60*65%

Weighted Average of Contribution Margin = 70 + 39

Weighted Average of Contribution Margin = 109

Break Even Point in Units = Fixed Costs / Weighted Average of
Contribution Margin

Break Even Point in Units = $1,021,330 / 109

Break Even Point in units = 9,370

Break Even Point in Units of Q = 9,370 *35%

Break Even Point in Units of Q = 3,280

Break Even Point in Units of Z = 9,370 *65%

Break Even Point in Units of Z = 6,091

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