A company produces and sells two products. The first product accounts for 75% of sales and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the break-even point, what number of units of the first product will have been sold?
The fact pattern of the question requires us to first identify the contribution of composite units before determining the breakeven units of first product sold
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Total Fixed costs = first product $100,000 + Second product $212,000 = $312,000.
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Finally, the number of units of First product at the Breakeven point is determined by multiplying the composite units by the number of units of First product (i.e.) 13,000 x 3 = 39,000 units.