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