Tetra Manufacturing has the following sales mix for its three products: A, 40%; B, 20%; and C, 40%. Fixed costs total $800,000 and the weighted-average contribution margin is $100. How many units of product A must be sold to break-even?

Question

Quizplus · Accepted Answer

The weighted-average contribution margin is $100, which means that for every $100 of sales, $100 is available to cover fixed costs. The fixed costs are $800,000, so the company needs to sell $800,000/$100 = 8,000 units to break-even. Since product A accounts for 40% of sales, the company needs to sell 8,000 * 0.40 = 3,200 units of product A to break-even.

Tetra Manufacturing Has the Following Sales Mix for Its Three