Dane Co. sells three products and incurs $18,000 per period in fixed costs. The three products have the following characteristics: How many units of Product P will be sold at the breakeven point?

Question

Dane Co. sells three products and incurs $18,000 per period in fixed costs. The three products have the following characteristics:  How many units of Product P will be sold at the breakeven point?

Quizplus · Accepted Answer

To find the breakeven point, we need to find out the total contribution margin (sales price minus variable cost) needed to cover the fixed costs. 
Product P has the highest contribution margin per unit ( $12 - $5 = $7) compared to other products. 
Therefore, the breakeven point can be calculated as:

$7P = $18,000 
P = 2,571.43 units

Since we cannot sell fractional units, the closest answer choice is C, which is 120 units.

Dane Co Sells Three Products and Incurs $18,000 Per Period in in Fixed