Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the break-even point in composite units.

Question

Quizplus · Accepted Answer

First, we need to calculate the weighted average contribution margin per unit:
[(4/6) x ($75 - $35)] + [(2/6) x ($95 - $40)] = $28.33

Then, we can use the contribution margin per unit to calculate the break-even point in composite units:
Break-even point = Fixed costs / Contribution margin per unit
Break-even point = $418,500 / $28.33
Break-even point ≈ 1,550 units

Therefore, the best choice is C.

Baines Brothers Manufactures and Sells Two Products, a and Z