Rierson Inc. produces and sells two products. Data concerning those products for the most recent month appear below:
The fixed expenses of the entire company were $17,730. The break-even point for the entire company is closest to:

Question

Rierson Inc. produces and sells two products. Data concerning those products for the most recent month appear below: 
The fixed expenses of the entire company were $17,730. The break-even point for the entire company is closest to:

Quizplus · Accepted Answer

To calculate the break-even point, we need to first calculate the contribution margin per unit for each product:

Product A: Selling price - variable cost = $30 - $10 - $8 = $12
Product B: Selling price - variable cost = $50 - $20 - $15 = $15

Next, we calculate the weighted average contribution margin per unit:

(200 units of A x $12 CM) + (50 units of B x $15 CM) = $2,400 + $750 = $3,150

To find the break-even point, we divide the fixed expenses by the weighted average contribution margin per unit:

$17,730 ÷ $3,150 = 5.62

Therefore, the break-even point for the entire company is approximately 6 units (since we can't sell a fractional unit). To find the break-even point in dollars, we multiply the break-even point in units by the weighted average selling price:

6 units x $40 average selling price = $240

So the closest answer is C) $31,661