Mayfield Company sells two products, Blue models and Plaid models. Blue models sell for $42 per unit with variable costs of $15 per unit. Plaid models sell for $48 per unit with variable costs of $35 per unit. Total fixed costs for the company are $19,200. Mayfield Company typically sells three Blue models for every three Plaid models. What is the breakeven point in total units? (Round any intermediary calculations to the nearest whole number.)

Question

Quizplus · Accepted Answer

To find the breakeven point in total units, we need to use the formula:

Breakeven point in units = Fixed costs ÷ Contribution margin per unit

To find the contribution margin per unit, we need to subtract the variable cost per unit from the selling price per unit:

Contribution margin per unit for Blue models: $42 - $15 = $27 
Contribution margin per unit for Plaid models: $48 - $35 = $13

Since Mayfield Company typically sells three Blue models for every three Plaid models, we can consider them as one unit:

Contribution margin per unit for one unit: (3 x $27) + (3 x $13) = $120

Now we can plug this into the formula:

Breakeven point in units = $19,200 ÷ $120 = 160

Therefore, the breakeven point in total units is 160 units. The best choice is C.

Mayfield Company Sells Two Products, Blue Models and Plaid Models