Crabtree Inc.produces two types of products - Gizmos and Gadgets.The following information is available related to each product:
$\begin{array}{lrrr}
& \underline{\text { Gizmos } }& \underline{\text { Gadgets} } \
\text { Sales price per unit }& \$ 80 & \$ 50 \
\text { Variable costs per unit } & 36 & 22
\end{array}$
Three-fourths of the products sold are Gizmos and one-fourth are Gadgets.If total fixed costs are $50 000,how many total units need to be sold in order for the company to break even?

Question

Crabtree Inc.produces two types of products - Gizmos and Gadgets.The following information is available related to each product:
$\begin{array}{lrrr} 
& \underline{\text { Gizmos } }& \underline{\text { Gadgets} } \
\text { Sales price per unit }& \$ 80 & \$ 50 \
\text { Variable costs per unit } & 36 & 22
\end{array}$
Three-fourths of the products sold are Gizmos and one-fourth are Gadgets.If total fixed costs are $50 000,how many total units need to be sold in order for the company to break even?

Quizplus · Accepted Answer

To calculate the break-even point in units, we first determine the weighted average contribution margin per unit. Given that three-fourths of the products sold are Gizmos and one-fourth are Gadgets, we calculate the contribution margin for each:- Gizmos: $80 - $36 = $44 per unit- Gadgets: $50 - $22 = $28 per unitWeighted average contribution margin per unit = $(3/4 \times 44) + (1/4 \times 28) = 33 + 7 = $40$Total fixed costs = $50,000Break-even point in units = Total fixed costs / Weighted average contribution margin per unit = $50,000 / $40 = 1250 units.

Crabtree Inc Three-Fourths of the Products Sold Are Gizmos and One-Fourth Are