Elise Corporation has the following sales mix for its three products: A, 20%; B, 35%; and C, 45%. Fixed costs total $400,000 and the weighted-average contribution margin is $100. How many units of product A must be sold to break-even?
A) 800.
B) 4,000.
C) 20,000.
D) None of the answers is correct.
E) Cannot be determined based on the information presented.

Question

Quizplus · Accepted Answer

The weighted-average contribution margin is $100, which means that for every $100 of sales, $100 is available to cover fixed costs. The fixed costs are $400,000, so the company needs to generate $400,000 in contribution margin to break-even.The sales mix is 20% for product A, 35% for product B, and 45% for product C. This means that for every $100 of sales, $20 is from product A, $35 is from product B, and $45 is from product C.To calculate how many units of product A must be sold to break-even, we need to divide the fixed costs by the contribution margin per unit of product A. The contribution margin per unit of product A is $20, so the number of units of product A that must be sold to break-even is $400,000/$20 = 20,000 units.

Elise Corporation Has the Following Sales Mix for Its Three