Alexis Incorporated sells two products, larges and smalls. Larges sell for $94 per unit with variable costs of $60 per unit. Smalls sell for $35 per unit with variable costs of $15 per unit. Total fixed costs for the company are $12,000. Alexis Incorporated typically sells five larges for every four smalls. What is the breakeven point in total units?

Question

Quizplus · Accepted Answer

First, we need to determine the contribution margin per unit for each product:
- Larges: $94 - $60 = $34
- Smalls: $35 - $15 = $20
Next, we need to determine the sales mix. For every 5 larges sold, 4 smalls are sold. This means the sales mix is 5/9 larges and 4/9 smalls.
Using this information, we can calculate the weighted average contribution margin per unit:
($34 * 5/9) + ($20 * 4/9) = $25.78
Breakeven point in units can be calculated using the following formula:
Breakeven point (units) = Fixed Costs / Weighted Average Contribution Margin per Unit
Breakeven point (units) = $12,000 / $25.78 ≈ 466 units
Therefore, the breakeven point in total units is 466 units. The closest answer choice is C (432 units), so that is the best choice.

Alexis Incorporated Sells Two Products, Larges and Smalls