Question

Steven Company has fixed costs of $186,032. 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 per Unit Variable Cost per Unit Contribution Margin per Unit X $1,344 $504 $840 Y 538 288 250 The sales mix for Products X and Y is 60% and 40%, respectively. Determine the break-even point in units of X and Y. Round answers to the nearest whole number. units of X units of Y

Answer 1

Step 1 : Weighted average Contribution Margin

X's Contribution margin per unit = $840

Y's Contribution margin per unit = $250

Sales mix of X and Y = 60% and 40%

Weighted average contribution margin = ($840 * 60% + $250 * 40%) = $604

Step 2 : Break-even point in Units of X and Y

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

Fixed cost = $186,032

Weighted average contribution margin per unit = $604

Break-even point = $186,032 / $604 = 308 units

Break-even Point X = 308 units * 60% = 185 units Break-even Point Y = 308 units * 40% = 123 units

All the best...