The Pierson Co. has the following unit and mix data: Do Dah Total
Unit sales price $5.00 $4.00
Unit contribution margin 0.75 1.20
Sales mix ($)80% 20%
Fixed costs $99,000
Target profit 24,750
How many units of Dah must be sold at the breakeven point?

Question

Quizplus · Accepted Answer

The breakeven point is the point at which total revenue equals total costs. To calculate the breakeven point, we need to know the total fixed costs, the unit contribution margin, and the sales mix.The total fixed costs are $99,000. The unit contribution margin is the difference between the unit sales price and the unit variable cost. For Do, the unit contribution margin is $0.75. For Dah, the unit contribution margin is $1.20.The sales mix is the percentage of total sales that each product represents. For Do, the sales mix is 80%. For Dah, the sales mix is 20%.To calculate the breakeven point, we can use the following formula:Breakeven point = Total fixed costs / (Unit contribution margin * Sales mix)For Do, the breakeven point is:Breakeven point = $99,000 / (0.75 * 0.80) = 165,000 unitsFor Dah, the breakeven point is:Breakeven point = $99,000 / (1.20 * 0.20) = 41,250 unitsTherefore, the total breakeven point is 165,000 + 41,250 = 206,250 units. Since Dah has a sales mix of 20%, the number of units of Dah that must be sold at the breakeven point is 206,250 * 0.20 = 27,500 units.