Assuming a constant mix of 3 units of Small for every 1 unit of Large. Total fixed costs: $48,000
The break-even point in units would be

Question

Assuming a constant mix of 3 units of Small for every 1 unit of Large.  Total fixed costs: $48,000
The break-even point in units would be

Quizplus · Accepted Answer

Let x be the number of units of Large. Then the number of units of Small is 3x.

Total cost = Fixed cost + Variable cost

$48,000 = Fixed cost + (cost per unit)(total units)

$48,000 = Fixed cost + ($10x for Large + $3x for Small)(4x)

$48,000 = Fixed cost + ($52x)

We want to find the number of units that will make the total cost equal to the fixed cost, or:

Fixed cost = Fixed cost + ($52x)

$48,000 = $48,000 + ($52x)

$0 = $52x

x = 0

Therefore, we cannot produce a total of 0 units, which means that there is no break-even point. However, we can calculate the minimum total cost, which occurs when x = 400.

Total cost = Fixed cost + Variable cost

Total cost = $48,000 + ($10)(400) + ($3)(3)(400)

Total cost = $48,000 + $4,000 + $3,600

Total cost = $55,600

Therefore, to minimize losses, the company should produce 400 units of Large and 1,200 units of Small.

Assuming a Constant Mix of 3 Units of Small for Every