Question

Sales Mix and Break-Even Analysis

Jordan Company has fixed costs of $98,260. 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 |
||||||

Model 94 | $100 | $60 | $40 | ||||||

Model 81 | 160 | 140 | 20 |

The sales mix for products Model 94 and Model 81 is 70% and 30%, respectively. Determine the break-even point in units of Model 94 and Model 81 of the overall (total) product, E. If required, round your answers to the nearest whole number.

**a.** Product Model 94 ?units

**b.** Product Model 81 ? units

Answer #1

**Solution:**

Weighted average contribution margin per unit = (Contribution margin per unit of Model 94 * Sales mix) + (Contribution margin per unit of Model 81 * Sales mix)

= ($40*70%) + ($20 * 30%) = $34 per unit

Fixed cost = $98,260

Breaekven units = fixed cost / contribution margin per unit = $98,260 / $34 = 2890 units

Breakeven point in units of model 94 = Total breakeven units * Sales mix for model 94

= 2890 * 70% = 2023 units

Breakeven point in units of model 81 = Total breakeven units * Sales mix for model 81

= 2890 * 30% = 867 units

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