Birch Manufacturers has provided the following information regarding the two products that it sells: $$\begin{array} { | l | r | r | }
\hline & \text { Jet Boats } & \text { Ski Boats } \
\hline \text { Sales price per unit } & \$ 10,000 & \$ 24,000 \
\hline \text { Variable cost per unit } & \$ 4800 & \$ 18,000 \
\hline
\end{array}$$ Annual fixed costs are $300,000.
How many units must be sold in order for Birch to break even,assuming that Birch sells five jet boats for every two ski boats sold? (Round any intermediate calculations to two decimal places,and your final answer to the nearest unit.)
A) 7 jet boats and 8 ski boats
B) 39 jet boats and 16 ski boats
C) 16 jet boats and 39 ski boats
D) 8 jet boats and 7 ski boats

Question

Birch Manufacturers has provided the following information regarding the two products that it sells: $$\begin{array} { | l | r | r | } 
\hline & \text { Jet Boats } & \text { Ski Boats } \
\hline \text { Sales price per unit } & \$ 10,000 & \$ 24,000 \
\hline \text { Variable cost per unit } & \$ 4800 & \$ 18,000 \
\hline
\end{array}$$ Annual fixed costs are $300,000.
How many units must be sold in order for Birch to break even,assuming that Birch sells five jet boats for every two ski boats sold? (Round any intermediate calculations to two decimal places,and your final answer to the nearest unit.)
A) 7 jet boats and 8 ski boats
B) 39 jet boats and 16 ski boats
C) 16 jet boats and 39 ski boats
D) 8 jet boats and 7 ski boats

Quizplus · Accepted Answer

To find the break-even point, we first determine the contribution margin per unit for each product, then find the weighted average contribution margin based on the sales mix, and finally calculate the total units needed to cover the fixed costs. For Jet Boats, the contribution margin per unit is $10,000 - $4,800 = $5,200. For Ski Boats, it's $24,000 - $18,000 = $6,000. With a sales mix of 5 Jet Boats for every 2 Ski Boats, the weighted average contribution margin per "bundle" of 7 units (5 Jet + 2 Ski) is calculated as follows: (5 * $5,200 + 2 * $6,000) / 7. To break even, the total contribution margin must cover the $300,000 fixed costs. The calculation involves dividing the fixed costs by the weighted average contribution margin per bundle, then multiplying by the sales mix ratio to find the number of each type of boat needed. This results in 39 Jet Boats and 16 Ski Boats.

Birch Manufacturers Has Provided the Following Information Regarding the Two