McCoy 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 number of units of Product Z McCoy must sell to break even.
A)9,300.
B)6,200.
C)1,550.
D)3,100.
E)6,750.

Question

Quizplus · Accepted Answer

Let's first find the contribution margin per unit for both products:
Product A: $75 - $35 = $40
Product Z: $95 - $40 = $55

Next, we need to find the weighted contribution margin per unit:
(4/6)($40) + (2/6)($55) = $43.33

To break even, the total contribution margin must equal the fixed costs:
Q($43.33) = $418,500
Q = 9,650 units total
Since the ratio of A to Z is 4:2, McCoy must sell 2/6 of the total units as Z:
(2/6)(9,650) = 3,100 units of Z to break even.

Therefore, the best choice is D.

McCoy Brothers Manufactures and Sells Two Products,A and Z in the Ratio