Question

Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30,and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What isthe break-even point in composite units?

Answer 1

Answer:

5000 units

Explanation:

The Break-even level is calculated by dividing the fixed cost by the contribution margin per unit.

For this sales mix, the contribution margin per unit is the aggregate of each contribution margin. Contribution margin is calculated by subtracting variable cost from the selling price  

Contribution margin  for A is $20- $12 = $8  x 3 units

Contribution margin for B si $ 30 - $18 = $12 x 2 units

Contribution margin for C is $40 -$24= $16  x 1 unit

Total contribution margin per unit will be

(8 x 3) x (12 x 2 ) x( $16 x 1)= $64

Break-even point = $320,000 /64

=5000 units