Figure 4-5.Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold.
-Refer to Figure 4-5. What is the number of deluxe models sold at break-even?

Question

Quizplus · Accepted Answer

To calculate the break-even point, we need to find the total contribution margin, which is the difference between the selling price and variable expenses.

For the standard model, the contribution margin is $150 ($360 - $210). For the deluxe model, the contribution margin is $200 ($500 - $300). For the superior model, the contribution margin is $1000 ($1600 - $600).

Using the weighted-average contribution margin, we can calculate the break-even point as:

$300,000 / ($150*8 + $200*4 + $1000) = 400 units of superior models

Since Standlar sells 4 deluxe models for every 8 standard models and 1 superior model, the total number of deluxe models sold at break-even is:

(4/13) * 400 = 123 rounded up to 400

Therefore, the answer is C, 400 deluxe models.