Ch. 4 01 [break-even for a multi-product company) A company produces two product
ID: 2537682 • Letter: C
Question
Ch. 4 01 [break-even for a multi-product company) A company produces two products, with relevant information as follows: Product X Product Y Selling price Variable expenses $30 100% $1240% $18 60% $40 $10 $30 100% 25% 75% Contribution margin Unit sales Dollar sales 105,000 $3,150,000 15,000 $600,000 Total fxed expenses $800,000 Calculate the break-even point in dollars for the two product company, (do not round your intermediate calculations) O A. $1,292,929 B. $1,185,186 O C. $1.125,000 O D. $1,282,051Explanation / Answer
Break-even point = Total Fixed expenses/(weighted avg. selling price - weighted avg. variable expenses)
weighted avg. selling price = (sale price of product X * sales percentage of product X) + (Sale price of product Y*Sales percentage of product Y)
= 30*105000/(105000+15000) + 40*15000/(105000+15000)
= 26.25 + 5
= 31.25
Weighted avg. variable expenses = variable expense of product X*sales percentage of product X + variable expense of product X*sales percentage of product X
= 12*105000/(105000+15000) + 10*15000/(105000+15000)
= 10.5+1.25
= 11.75
Total fixed expenses = 800000(Given)
= 800000/(31.25-11.75)
= 800000/19.5
= 41025.64 or 41026 units
Please comment in case of any further clarification required.