Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
$\begin{array}{lccc}
& \text { Plane } & \text { Boat } & \text { Total } \
\text { Selling price per unit } & \$ 300 & \$ 100 & \
\text { Variable cost per unit } & \$ 240 & \$ 60 & \
\text { Expected unit sales } & 28,000 & 7,000 & 35,000 \
\text { Sales mix } & 80 \% & 20 \% & 100 \% \
\text { Fixed costs } & & & \$ 1,400,000
\end{array}$

-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units of each product must be sold to break even?
A)Plane 22,400 units;Boat 5,600 units
B)Plane 11,200 units;Boat 2,800 units
C)Plane 20,000 units;Boat 5,000 units
D)Plane 56,000 units;Boat 14,000 units
E)None of the answer choices is correct.

Question

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
 $\begin{array}{lccc}
& \text { Plane } & \text { Boat } & \text { Total } \
\text { Selling price per unit } & \$ 300 & \$ 100 & \
\text { Variable cost per unit } & \$ 240 & \$ 60 & \
\text { Expected unit sales } & 28,000 & 7,000 & 35,000 \
\text { Sales mix } & 80 \% & 20 \% & 100 \% \
\text { Fixed costs } & & & \$ 1,400,000
\end{array}$

-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units of each product must be sold to break even?
A)Plane 22,400 units;Boat 5,600 units
B)Plane 11,200 units;Boat 2,800 units
C)Plane 20,000 units;Boat 5,000 units
D)Plane 56,000 units;Boat 14,000 units
E)None of the answer choices is correct.

Quizplus · Accepted Answer

To calculate the break-even units of each product, we need to use the formula:

Break-even units = Fixed costs / Contribution margin per unit

For the entire company to break even, the total contribution margin must equal the total fixed costs, which are $126,000 in this case.

We can start with the Boat product:

Break-even units for Boat = $56,000 / ($4.50 - $3.00) = 5,600 units

Then, we can calculate the break-even units for the Plane product:

Break-even units for Plane = $70,000 / ($12.00 - $7.50) = 5,000 units

Therefore, the company must sell 20,000 units of the Plane product and 5,600 units of the Boat product to break even. The answer is C.

Exhibit 6-4 Sanchez Company Produces Two Different Remote Control Products

Exhibit 6-4
Sanchez Company Produces Two Different Remote Control Products