Jackson Company has provided the following information regarding the two products that it sells: $$\begin{array} { | l | r | c | }
\hline & \text { Jet Boats } & \text { Ski Boats } \
\hline \text { Sales price per unit } & \$ 8,000 & \$ 20,000 \
\hline \text { Variable cost per unit } & \$ 4,800 & \$ 14,000 \
\hline
\end{array}$$ Annual fixed costs are $280,000.
How many units must be sold in order for Jackson to breakeven, assuming that Jackson sells five jet boats for every two ski boats sold?

Question

Jackson Company has provided the following information regarding the two products that it sells: $$\begin{array} { | l | r | c | } 
\hline & \text { Jet Boats } & \text { Ski Boats } \
\hline \text { Sales price per unit } & \$ 8,000 & \$ 20,000 \
\hline \text { Variable cost per unit } & \$ 4,800 & \$ 14,000 \
\hline
\end{array}$$ Annual fixed costs are $280,000.
How many units must be sold in order for Jackson to breakeven, assuming that Jackson sells five jet boats for every two ski boats sold?

Quizplus · Accepted Answer

Let's call the number of jet boats sold "J" and the number of ski boats sold "S".

We know that Jackson sells five jet boats for every two ski boats sold. So, we can write:

J = 5S/2

Next, we can write an expression for Jackson's total revenue (R):

R = 8000J + 20000S

We can also write an expression for Jackson's total variable costs (VC):

VC = 4800J + 14000S

Finally, we know that Jackson's total costs (TC) are equal to its fixed costs (FC) plus its variable costs (VC):

TC = FC + VC = 280000 + 4800J + 14000S

To find the breakeven point, we need to determine the values of J and S that make TC equal to R. So, we can write:

280000 + 4800J + 14000S = 8000J + 20000S

Simplifying this equation, we get:

3200J = 6000S - 280000

Substituting J = 5S/2, we get:

3200 (5S/2) = 6000S - 280000

Simplifying and solving for S, we get:

S = 20

So, Jackson must sell 20 ski boats. Using J = 5S/2, we get:

J = 50

Therefore, Jackson must sell 50 jet boats and 20 ski boats to breakeven. So, the answer is B.

Jackson Company Has Provided the Following Information Regarding the Two