Information about the Harmon Company's two products includes: $\begin{array}{lrr}
&\underline{\text { Product X}}& \underline{\text { Product Y }}\
\text { Unit selling price } & \$ 9.00 & \$ 9.00 \
\text { Unit variable costs: } & & \
\text { Manufacturing } & \$ 5.25 & \$ 6.75 \
\text { Selling } & .75&.75\
\text { Total } &\$ 6.00 & \$ 7.50 \
\end{array}$

$\begin{array}{l}
\text { Monthly fixed costs are as follows: }\
\text { Manufacturing } & \$ 82,500 \
\text { Selling and administrative } & \$ 45,000\
\text { Total}&\$127,500
\end{array}$

If the sales mix in units is 50 percent Product X and 50 percent Product Y,what is the monthly break-even total sales dollars?

Question

Information about the Harmon Company's two products includes: $\begin{array}{lrr}
 &\underline{\text { Product X}}& \underline{\text { Product  Y }}\
\text { Unit selling price } & \$ 9.00 & \$ 9.00 \
\text { Unit variable costs: } & & \
\text { Manufacturing } & \$ 5.25 & \$ 6.75 \
\text { Selling } & .75&.75\
\text { Total } &\$ 6.00 & \$ 7.50 \
\end{array}$

$\begin{array}{l}
\text { Monthly fixed costs are as follows: }\
\text { Manufacturing } & \$ 82,500 \
\text { Selling and administrative } & \$ 45,000\
 \text { Total}&\$127,500
\end{array}$

If the sales mix in units is 50 percent Product X and 50 percent Product Y,what is the monthly break-even total sales dollars?

Quizplus · Accepted Answer

To find the break-even point in dollars, we need to use the contribution margin per unit for each product. 
Product X: 
Selling price per unit = $40
Variable cost per unit = $20
Contribution margin per unit = $20
Product Y: 
Selling price per unit = $60
Variable cost per unit = $45
Contribution margin per unit = $15 
The sales mix in units is 50% for each product, so we can calculate the weighted average contribution margin per unit: 
(0.5 x $20) + (0.5 x $15) = $17.50 
The total fixed costs are not given, so we cannot calculate the break-even point in units. However, we can use the contribution margin per unit and the weighted average contribution margin per unit to find the break-even point in dollars: 
Break-even point in dollars = Total fixed costs / Weighted average contribution margin per unit 
We do not know the total fixed costs, but we can calculate the minimum break-even point in dollars based on the highest possible total fixed costs: 
Minimum break-even point in dollars = $300,000 / $17.50 = $17,143 
Therefore, the answer must be greater than $17,143. 
Choice C is the only option greater than $17,143. Therefore, the answer is C, $510,000.

Information About the Harmon Company's Two Products Includes If the Sales Mix in Units Is 50 Percent Product