Information about the Harmon Company's two products includes: If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total sales dollars is

Question

Information about the Harmon Company's two products includes:  If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total sales dollars is

Quizplus · Accepted Answer

To calculate the monthly break-even total sales dollars, we need to find the total contribution margin (CM) and then divide it by the weighted-average contribution margin per unit.

Total CM = (50% x 400,000 x 0.40) + (50% x 300,000 x 0.60) = $80,000 + $90,000 = $170,000

Weighted-average contribution margin per unit = (50% x $20) + (50% x $30) = $25

Monthly break-even total sales dollars = Total CM / Weighted-average contribution margin per unit 
= $170,000 / $25 per unit = $6,800 units

Total sales = 6,800 units x $50 (weighted average price) = $340,000

Therefore, the monthly break-even total sales dollars is $510,000 (3 times the total sales).

Information About the Harmon Company's Two Products Includes: If