Assume the following information for two products,Hawaii Fantasy and Hawaii Joy.
$\begin{array}{lll}&\text { Hawaii Fantasy }&\text { Hawaii joy }\
\text { Sales mix } & 2 \text { units } & 1 \text { unit } \
\text { Selling price per unit } & \$ 15 & \$ 100 \
\text { Variable cost per unit } & \$ 10 & \$ 40
\end{array}$
Fixed expenses total $490,000 per year.What is the breakeven point in units for each product?
A) 4,575 units of Hawaii Fantasy and 18,300 units of Hawaii Joy
B) 7,000 units of Hawaii Fantasy and 14,000 units of Hawaii Joy
C) 18,300 units of Hawaii Fantasy and 4,575 units of Hawaii Joy
D) 14,000 units of Hawaii Fantasy and 7,000 units of Hawaii Joy

Question

Quizplus · Accepted Answer

To find the breakeven point in units for each product, we first need to calculate the weighted average contribution margin per unit. The sales mix ratio is 2:1 for Hawaii Fantasy to Hawaii Joy. 1. Calculate the contribution margin per unit for each product:- Hawaii Fantasy: $15 - $10 = $5 per unit- Hawaii Joy: $100 - $40 = $60 per unit2. Calculate the weighted average contribution margin per unit:$$ \text{Weighted average CM} = \frac{(2 \times \$5) + (1 \times \$60)}{2 + 1} = \frac{\$10 + \$60}{3} = \frac{\$70}{3} = \$23.\overline{33} \text{ per unit} $$3. Calculate the total units needed to break even:$$ \text{Total units} = \frac{\text{Total fixed expenses}}{\text{Weighted average CM per unit}} = \frac{\$490,000}{\$23.\overline{33}} = 21,000 \text{ units (total mix units)} $$4. Calculate the breakeven point in units for each product according to the sales mix:- Hawaii Fantasy: $21,000 \times \frac{2}{3} = 14,000 $ units- Hawaii Joy: $21,000 \times \frac{1}{3} = 7,000 $ unitsTherefore, the correct answer is 14,000 units of Hawaii Fantasy and 7,000 units of Hawaii Joy.

Assume the Following Information for Two Products,Hawaii Fantasy and Hawaii