Question

Ahmed & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows:

Plain Fancy
Unit selling price $ 21.00 $ 32.00
Variable cost per unit 10.00 28.00

Sixty percent of the unit sales are Plain, and annual fixed expenses are $57,400. Assuming that the sales mix remains constant, the number of units of Plain that Ahmed must sell to break even is: (Round intermediate calculations to 2 decimal places and final answer to nearest whole number)

Answer 1

Answer:

7,000

Explanation:

Weighted-average unit contribution margin:

= [(Unit selling price of plain - Variable cost per unit of plain) × percent of the unit sales are Plain] + [(Unit selling price of Fancy - Variable cost per unit of Fancy) × percent of the unit sales are Fancy]

= [($21 - $10) × 60%] + ($32 - $28) × 40%

= ($11 × 60%) + ($4 × 40%)

= $6.6 + $1.6

= $8.2

Break even sales:

= Annual fixed expenses ÷ Weighted-average unit contribution margin

= $57,400 ÷ $8.2

= 7,000