The following information is being provided for the two products produced by the Stay-Dri Deodorant Company.For every 5 units sold, 3 of those units are from the men's line of product while 2 units are from the women's line of product. $$\begin{array} { l l l l }
& \text { Men } & \text { Women } & \text { Total } \
\text { Expected product mix } & 3 & 2 & \
\text { Selling price per unit } & \$ 2.20 & 2.80 & \
\text { Variable cost per unit } & 1.50 & 1.10 & \
\text { Fixed Costs (total) } & & & \$ 88,000
\end{array}$$ How many units of each product need to be sold in order to break-even in total?
Men Women

Question

The following information is being provided for the two products produced by the Stay-Dri Deodorant Company.For every 5 units sold, 3 of those units are from the men's line of product while 2 units are from the women's line of product. $$\begin{array} { l l l l } 
& \text { Men } & \text { Women } & \text { Total } \
\text { Expected product mix } & 3 & 2 & \
\text { Selling price per unit } & \$ 2.20 & 2.80 & \
\text { Variable cost per unit } & 1.50 & 1.10 & \
\text { Fixed Costs (total) } & & & \$ 88,000
\end{array}$$ How many units of each product need to be sold in order to break-even in total?
Men Women

Quizplus · Accepted Answer

To calculate the break-even point in units for a company that sells multiple products, we use the weighted-average contribution margin approach. First, we calculate the contribution margin per unit for each product, which is the selling price per unit minus the variable cost per unit. Then, we find the weighted-average contribution margin based on the expected product mix. Finally, we divide the total fixed costs by the weighted-average contribution margin to find the total number of units needed to break even. The number of units for each product is then determined based on their expected product mix ratio.For the Men's product:- Selling price per unit = $2.20- Variable cost per unit = $1.50- Contribution margin per unit = $2.20 - $1.50 = $0.70For the Women's product:- Selling price per unit = $2.80- Variable cost per unit = $1.10- Contribution margin per unit = $2.80 - $1.10 = $1.70Expected product mix ratio is 3:2 (Men:Women).Weighted-average contribution margin = [(3 * $0.70) + (2 * $1.70)] / (3 + 2) = ($2.10 + $3.40) / 5 = $5.50 / 5 = $1.10Total fixed costs = $88,000Total units to break even = Total fixed costs / Weighted-average contribution margin = $88,000 / $1.10 = 80,000 unitsBased on the product mix ratio (3:2), we distribute the total units as follows:- Men: (3/5) * 80,000 = 48,000 units- Women: (2/5) * 80,000 = 32,000 units

The Following Information Is Being Provided for the Two Products