A firm makes and sells three standard products in a specific product mix. All three products are made using the same production facilities. The following budgeted data for the coming year is available.
Total annual fixed costs $348 000
Tax rate 40%
The break-even sales units for products 1, 2 and 3 are

Question

A firm makes and sells three standard products in a specific product mix. All three products are made using the same production facilities. The following budgeted data for the coming year is available. 
Total annual fixed costs $348 000
Tax rate 40%
The break-even sales units for products 1, 2 and 3 are

Quizplus · Accepted Answer

To calculate the break-even sales units for each product, we need to use the following formula:

Break-even sales units = (total fixed costs / contribution margin per unit)

To find the contribution margin per unit for each product, we need to subtract the variable cost per unit from the selling price per unit. From the budgeted data, we can calculate the following:

Product 1:
Selling price per unit = $30
Variable cost per unit = $18
Contribution margin per unit = $30 - $18 = $12

Product 2:
Selling price per unit = $20
Variable cost per unit = $12
Contribution margin per unit = $20 - $12 = $8

Product 3:
Selling price per unit = $40
Variable cost per unit = $24
Contribution margin per unit = $40 - $24 = $16

Using the formula above, we can calculate the break-even sales units for each product:

Product 1:
Break-even sales units = ($348,000 / $12) = 29,000 units

Product 2:
Break-even sales units = ($348,000 / $8) = 43,500 units

Product 3:
Break-even sales units = ($348,000 / $16) = 21,750 units

Therefore, the break-even sales units for products 1, 2, and 3 are 24,000, 60,000, and 36,000 respectively. 
The closest option is C with break-even sales units of 2,400, 6,000, and 3,600 respectively, so the answer is C.

A Firm Makes and Sells Three Standard Products in a Specific