The following data pertain to the three products produced by Excellent Corporation: Fixed costs are $90,000 per month.

The sales mix of Excellent Corporation consists of 65% of Product A, 20% of Product B, and 15% of Product C.
What is the monthly break-even point for total units?
A) 45,000 units
B) 36,000 units
C) 50,000 units
D) 180,000 units

Question

The following data pertain to the three products produced by Excellent Corporation: Fixed costs are $90,000 per month.
 
 The sales mix of Excellent Corporation consists of 65% of Product A, 20% of Product B, and 15% of Product C.
What is the monthly break-even point for total units?
A) 45,000 units 
B) 36,000 units 
C) 50,000 units 
D) 180,000 units

Quizplus · Accepted Answer

SUPPORTING CALCULATIONS:
Average contribution margin per unit = [Units sold of Product A × (Price - Variable cost per unit)] + [Units sold of Product B × (Price - Variable cost per unit)] + [Units sold of Product C × (Price - Variable cost per unit)]
Average contribution margin per unit = [0.65 × ($6.00 - $4.50)] + [0.20 × ($8.00 - $5.50)] + [0.15 × ($9.00 - $5.50)]
Average contribution margin per unit = $0.975 + $0.50 + $0.525 = $2.00
Monthly break-even point for total units = Fixed costs per month / Average contribution margin per unit
Monthly break-even point for total units = $90,000 / $2.00 = 45,000 units

The Following Data Pertain to the Three Products Produced by Excellent