Mats for Life produces yoga mats.Mat A sells for $60 and has a contribution margin ratio of 40%.Mat B sells for $100 and has a contribution margin ratio of 60%.This year the company sold a total of 80,000 mats, of which 30,000 were units of Mat A.At the breakeven point, the company needs to sell 25,500 units of Mat A.How many units of Mat B were sold and what are the company's fixed costs?

Question

Quizplus · Accepted Answer

Let's first find the contribution margin per unit for each mat:

Contribution margin per unit of Mat A = $60 x 40% = $24
Contribution margin per unit of Mat B = $100 x 60% = $60

We know that at the breakeven point, the company needs to sell a total of 25,500 units of Mat A. Let's use this information to find the total contribution margin at the breakeven point:

Total contribution margin from Mat A = $24 x 25,500 = $612,000

To find the total contribution margin from Mat B, we can use the following formula:

Total contribution margin from Mat B = (Total sales - Total sales of Mat A) x Contribution margin ratio of Mat B

We know that total sales were 80,000 mats, and 30,000 of those were Mat A. So:

Total sales of Mat B = 80,000 - 30,000 = 50,000

Total contribution margin from Mat B = (50,000) x (60%) = $30,000

Now we can set up an equation to find the company's fixed costs:

Total contribution margin = Total fixed costs

Substituting the values we just found:

$612,000 + $30,000 = Total fixed costs
Total fixed costs = $642,000

Therefore, the answer is B: 50,000 units of Mat B were sold, and the company's fixed costs were $3,162,000.

Mats for Life Produces Yoga Mats