Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are: Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?

Question

Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are:  Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?

Quizplus · Accepted Answer

To find the break-even point, we need to calculate the total contribution margin, which is the revenue minus variable costs.

For X: 
Total revenue = 5,000 units * $40 per unit = $200,000 
Total variable costs = 5,000 units * $22 per unit = $110,000 
Contribution margin = $90,000

For Y: 
Total revenue = 35,000 units * $20 per unit = $700,000 
Total variable costs = 35,000 units * $7 per unit = $245,000 
Contribution margin = $455,000

Total contribution margin = $90,000 + $455,000 = $545,000

The break-even point can be calculated as: 
Fixed costs / Contribution margin per unit 
$675,000 / ($455,000 / 35,000 units) = 30,000 units

Therefore, the answer is C, 30,000 units.

Rusty Co Sells Two Products, X and Y