Argyle sells steel beams to building contractors in two sizes-regular and heavy. Argyle sells 4 regular beams for every one heavy beam. Cost data are as follows:
$$\begin{array} { | l | r | r | }
\hline & { \text { Regular } } & { \text { Heavy } } \
\hline \text { Price per unit } & \$ 20.00 & \$ 28.00 \
\hline \text { Variable cost per unit } & \$ 16.00 & \$ 20.00\
\hline
\end{array}$$
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Argyle's fixed costs are $2,880 per month. How much is the breakeven point for each product type?

Question

Argyle sells steel beams to building contractors in two sizes-regular and heavy. Argyle sells 4 regular beams for every one heavy beam. Cost data are as follows:
$$\begin{array} { | l | r | r | } 
\hline &  { \text { Regular } } &  { \text { Heavy } } \
\hline \text { Price per unit } & \$ 20.00 & \$ 28.00 \
\hline \text { Variable cost per unit } & \$ 16.00 & \$ 20.00\
\hline
\end{array}$$
-
Argyle's fixed costs are $2,880 per month. How much is the breakeven point for each product type?

Quizplus · Accepted Answer

To find the breakeven point, calculate the contribution margin per unit for each type: Regular = $4, Heavy = $8. The sales mix is 4 regular for every 1 heavy, so the weighted average contribution margin is ($4*4 + $8*1)/5 = $4.80. The breakeven point in units is $2,880 / $4.80 = 600 units. With the sales mix, this is 480 regular and 120 heavy.

Argyle Sells Steel Beams to Building Contractors in Two Sizes-Regular