Friar Corp.sells two products.Product A sells for $100 per unit,and has unit variable costs of $60.Product B sells for $70 per unit,and has unit variable costs of $50.Currently,Friar sells three units of product B for every one unit of product A sold.Friar has fixed costs of $750,000.What is Friar's break-even point in units?
A)30,000 units of A and 30,000 units of B
B)7,500 units of A and 22,500 units of B
C)22,500 units of A and 7,500 units of B
D)15,000 units of A and 15,000 units of B

Question

Quizplus · Accepted Answer

Let x be the number of units of A sold.
Then, the number of units of B sold is 3x.
The total revenue is:
100x + 70(3x) = 310x
The total variable cost is:
60x + 50(3x) = 210x
The total cost is:
210x + 750,000
The break-even point is where total revenue equals total cost:
310x = 210x + 750,000
100x = 750,000
x = 7,500
Therefore, Friar needs to sell 7,500 units of A and 3 times as many, or 22,500 units of B to break even.