Question

York Manufacturing makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253,750. Last year, York sold 12,000 gyms and 8,000 tree houses.

Q1 What is the number of jungle gyms sold at break-even?

1. 1,002
2. 2,625
3. 875
4. 1,750
5. 668
6. None of the above is correct

Q2 What is the number of tree houses sold at break-even?

1. 1,002
2. 2,625
3. 875
4. 1,750
5. 668
6. None of the above is correct

Answer 1

	Jungle gyms ($)	Tree houses ($)
Seling Price per Unit (A)	120	200
Variable Cost Per unit (B)	90	100
Contribution Margin Per Unit(C = A - B)	$30	$100
Weight (D)	0.6	. 0.4
	(12,000/20,000)	( 8,000/ 20,000)
Weighted Average Contribution Margin Per Unit
(C *D)	$18	$40

Total Weighted Average Contribution Margin Per Unit = $18 + $40

= $58

Q 1 : The number of jungle gyms sold at break-even is calculated below:

The number of jungle gyms sold at break-even = Fixed Cost / Contribution Margin Per Unit * Weight

= $253,750 / $58 * 0.60

= $2,625

So correct answer is option (B) or $2,625

Q 2: The number of tree houses sold at break-even is calculated below:

The number of tree houses sold at break-even  = Fixed Cost / Contribution Margin Per Unit *  Weight

     = $253,750 / $58 * 0.40

   = $1,750

So correct answer is option (D) or $1,750