Graham Corp.sells two products.Product A sells for $200 per unit,and has unit variable costs of $150.Product B sells for $50 per unit,and has unit variable costs of $20.Currently,Graham sells three units of Product B for every two units of Product A sold.Graham has fixed costs of $760,000.What is Graham's break-even point in units?

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit for each product:

Product A contribution margin = $200 - $150 = $50
Product B contribution margin = $50 - $20 = $30

Next, we need to calculate the sales mix ratio given that for every 2 units of A sold, 3 units of B are sold:

Sales Mix Ratio = 2A : 3B = 2/5 A : 3/5 B

Then, we can calculate the weighted average contribution margin per unit:

Weighted Average Contribution Margin = (2/5 * $50) + (3/5 * $30) = $36

Using the contribution margin per unit, we can calculate the break-even point in units:

Break-even point = Fixed Costs / Weighted Average Contribution Margin
Break-even point = $760,000 / $36
Break-even point = 21,111 units

To find the number of units for each product, we can use the sales mix ratio:

Units of A = 2/5 * 21,111 = 8,444 units
Units of B = 3/5 * 21,111 = 12,667 units

Therefore, the answer is C: 8,000 units of A and 12,000 units of B.