McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the number of units of Product Z McCoy must sell to break even.
A) 1,350.
B) 6,200.
C) 10,463.
D) 3,100.
E) 6,750.

Question

Quizplus · Accepted Answer

Let's start by setting up the equation for finding the break-even point:

Total revenue = Total cost

Let's assume that the company sells 4 units of product A and 2 units of product Z.

Total revenue = 4 x $75 + 2 x $95 = $470

Total variable cost = 4 x $35 + 2 x $40 = $190

Total cost = Total fixed cost + Total variable cost = $418,500 + $190 = $418,690

Now, let's solve for the number of units of product Z that the company must sell to break even:

Total revenue = Total cost
(2 x $95)x = $418,690 + (2 x $40)x
$190x = $458,690
x = 2,415.21

Since we cannot sell a fraction of a product, we need to round up to the nearest whole number:

Number of units of product Z = 3,100

Therefore, the best choice is D.

McCoy Brothers Manufactures and Sells Two Products, a and Z