Jackson Company has provided the following information regarding the two products that it sells:
$$\begin{array} { | l | l | l | }
\hline & { \text { Jet Boats } } &{ \text { Ski Boats } } \
\hline \text { Sales price per unit } & \$ 16,000 & \$ 40,000 \
\hline \text { Variable cost per unit } & \$ 4900 & \$ 17,000 \
\hline
\end{array}$$
Annual fixed costs are $310,000.
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? Round intermediary dollar amounts to the nearest dollar and round unit amounts up to the next whole unit.

Question

Jackson Company has provided the following information regarding the two products that it sells:
$$\begin{array} { | l | l | l | } 
\hline & { \text { Jet Boats } } &{ \text { Ski Boats } } \
\hline \text { Sales price per unit } & \$ 16,000 & \$ 40,000 \
\hline \text { Variable cost per unit } & \$ 4900 & \$ 17,000 \
\hline
\end{array}$$
Annual fixed costs are $310,000.
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? Round intermediary dollar amounts to the nearest dollar and round unit amounts up to the next whole unit.

Quizplus · Accepted Answer

Let's first find the contribution margin per unit for each product:

Jet boats:
Selling price = $50,000
Variable cost per unit = $28,000
Contribution margin per unit = $22,000

Ski boats:
Selling price = $25,000
Variable cost per unit = $16,000
Contribution margin per unit = $9,000

Now, using the information given in the question, we know that for every 5 jet boats sold, 2 ski boats are sold. So we can set up the following equation:

5x($50,000 - $28,000) + 2x($25,000 - $16,000) = $310,000

Where x is the number of batches of 5 jet boats and 2 ski boats sold.

Simplifying the equation gives us:

70x = $310,000
x = 4.43

This means we need to sell about 4.43 batches of 5 jet boats and 2 ski boats to reach breakeven. Rounding up to the nearest whole unit, we get:

5 batches of 5 jet boats and 2 ski boats

So we need to sell 25 jet boats and 10 ski boats to reach breakeven. But we need to round up to the nearest whole unit, since we can't sell fractional boats. So the answer is:

16 jet boats and 7 ski boats.

Jackson Company Has Provided the Following Information Regarding the Two