Stella Company sells only two products,Product A and Product B.
$$\begin{array} { | l | c | c | c | }
\hline & \text { Product A } & \text { Product B } & \text { Total } \
\hline \text { Selling price } & \$ 50 & \$ 30 & \
\hline \text { Variable cost per unit } & \$ 20 & \$ 10 & \
\hline \text { Total fixed costs } & & & \$ 2,110,000 \
\hline
\end{array}$$
Stella sells two units of Product A for each unit it sells of Product B.Stella faces a tax rate of 40%.Stella desires a net after-tax income of $54,000.The breakeven point in units would be ________.

Question

Stella Company sells only two products,Product A and Product B.
$$\begin{array} { | l | c | c | c | } 
\hline & \text { Product A } & \text { Product B } & \text { Total } \
\hline \text { Selling price } & \$ 50 & \$ 30 & \
\hline \text { Variable cost per unit } & \$ 20 & \$ 10 & \
\hline \text { Total fixed costs } & & & \$ 2,110,000 \
\hline
\end{array}$$
Stella sells two units of Product A for each unit it sells of Product B.Stella faces a tax rate of 40%.Stella desires a net after-tax income of $54,000.The breakeven point in units would be ________.

Quizplus · Accepted Answer

To find the breakeven point, calculate the required pre-tax income to achieve the desired after-tax income. Then, determine the contribution margin per unit for the sales mix and solve for the number of units needed to cover fixed costs and the required pre-tax income.

Stella Company Sells Only Two Products,Product a and Product B