Question

Leverage Corporation sells two products: Regular and Supreme. Leverage sells three Regulars for every two Supremes. The Regular sells for $20 each with variable costs of $11 each, whereas the Supreme sells for $25 each with variable costs of $15 each. If fixed costs are $21,000, what is the breakeven point in unit

Answer 1

Answer:Break even points of the two propduct =2,234.04 units  With each product having 1,340 .4 units   for regular and  supreme with 893.6units

Explanation:

Product--- Regular

Contribution Margin per unit = Selling price - variable price

=$20-$11=$9

Product--- Supreme

Contribution Margin per unit = Selling price - variable price

=$25-$15=$10

Product mix are in the ratio 3: 2  therefore

Supreme contains 3/3+2 x 100 = 60 %

Regular = 2/3+2 x 100 = 40%

Weighted Average Contribution Margin  for each product becomes

 Regular  =$9 x 60%= 5.4

Supreme =$ 10x 40%-=4.0

Total=                           9.4

Break even points of the two propduct =Total Fixed Cost /Weighted Average Contribution Margin

$21,000.00 /9.40 = 2,234.04 units

`With each units having

      Regular                         Supreme

         3                   :                  2

      60%                                   40%

2,234.04 x 60%                  2,234.04 x 40%

     1,340.4  units                                   893.6units