Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?
A) 16,875 units
B) 30,100 units
C) 30,000 units
D) 11,250 units

Question

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are:  Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?
A) 16,875 units 
B) 30,100 units 
C) 30,000 units 
D) 11,250 units

Quizplus · Accepted Answer

To calculate the break-even point in units, we need to use the formula:

Break-even point = Fixed Costs / (Price per unit - Variable cost per unit)

We are given that fixed costs are $675,000. We need to determine the price and variable cost per unit for each product.

For Product X:
Total units sold = 5,000
Total revenue = Price per unit x Total units sold
$450,000 = Price per unit x 5,000
Price per unit = $90

Variable cost per unit is provided in the table as $30

For Product Y:
Total units sold = 35,000
Total revenue = Price per unit x Total units sold
$2,800,000 = Price per unit x 35,000
Price per unit = $80

Variable cost per unit is provided in the table as $50

Now we can calculate the break-even point for Rusty Co:

Break-even point = $675,000 / (($90-$30)x5,000 + ($80-$50)x35,000)
Break-even point = $675,000 / ($300,000 + $1,050,000)
Break-even point = $675,000 / $1,350,000
Break-even point = 0.5

Therefore, Rusty Co's break-even point is 30,000 units (0.5 x 60,000 = 30,000). The correct choice is C (30,000 units).

Rusty Co Sells Two Products, X and Y