The following data pertain to Wistron Company's two products: If fixed expenses for the company as a whole are $60,000 and the product mix is constant,the overall break-even point for the company would be:

Question

The following data pertain to Wistron Company's two products:  If fixed expenses for the company as a whole are $60,000 and the product mix is constant,the overall break-even point for the company would be:

Quizplus · Accepted Answer

To find the overall break-even point for the company, we need to calculate the weighted average contribution margin ratio using the sales mix of the two products.

Product A: 
Contribution Margin = $60 - $40 = $20
Contribution Margin Ratio = 20/60 = 1/3

Product B: 
Contribution Margin = $90 - $70 = $20
Contribution Margin Ratio = 20/90 = 2/9

Weighted Average Contribution Margin Ratio = (1/3 * 4/7) + (2/9 * 3/7) = 10/27

Total Fixed Costs = $60,000

Break-even Point = Total Fixed Costs / Weighted Average Contribution Margin Ratio
Break-even Point = $60,000 / (10/27) = $162,000

However, this is the overall break-even point for the company. To find the break-even point for each product, we can use the following formula:

Break-even Point in Units = Fixed Costs / Contribution Margin per Unit

Product A:
Break-even Point in Units = $60,000 / ($60 - $40) = 3,000 units

Product B:
Break-even Point in Units = $60,000 / ($90 - $70) = 1,500 units

Therefore, the overall break-even point for the company is $162,000 and the break-even point for Product A and Product B are 3,000 units and 1,500 units, respectively. However, none of the answer choices provide this exact amount for the overall break-even point. The closest answer is C) $150,000, so it is the best choice.

The Following Data Pertain to Wistron Company's Two Products