Beachcomber Ltd produces and sells two models of surf boards: $$\begin{array} { l c c }
& \text { Standard } & \text { Super } \
\text { Selling price } & \$ 100 & \$ 280 \
\text { Variable costs } & 80 & 140
\end{array}$$ Total fixed costs are $180 000 and the company sells 5 Standards models for every Super model.What quantity of the Super model will be sold at break-even point?

Question

Beachcomber Ltd produces and sells two models of surf boards: $$\begin{array} { l c c } 
& \text { Standard } & \text { Super } \
\text { Selling price } & \$ 100 & \$ 280 \
\text { Variable costs } & 80 & 140
\end{array}$$ Total fixed costs are $180 000 and the company sells 5 Standards models for every Super model.What quantity of the Super model will be sold at break-even point?

Quizplus · Accepted Answer

To find the break-even point, calculate the contribution margin for each model: Standard = $20, Super = $140. The sales mix is 5:1, so for every 6 boards, 5 are Standard and 1 is Super. The weighted average contribution margin is $(5 \times 20 + 1 \times 140) / 6 = 40$. Break-even point in units = Total fixed costs / Weighted average contribution margin = 180,000 / 40 = 4500 units. Since 1 out of every 6 boards is a Super, the quantity of Super models sold is 4500 / 6 = 750.

Beachcomber Ltd Produces and Sells Two Models of Surf Boards