Question

Apple company has the following information concerning the 2 products that it sells.

		Product 1		Product 2
Sales Price per unit		$800		$300
Variable cost per unit		$500		$200

The company sells 12 units of Product 2 for each unit of Product 1 that it sells. How many units of Product 2 must it sell to breakeven if fixed costs total $75,000?

Answer 1

Answer:	Units of Product 2 that it must sell to breakeven if the fixed costs total $75,000.
		Product 1	Product 2
	Sales price per unit	$                     800	$                      300
	Less: Variable cost per unit	$                     500	$                      200
	Contribution margin per unit	$                     300	$                      100
	Ratio of units sold	1	12
	Contribution margin per sales mix	$                     115	($300*1+100*12)/(12+1)
	Fixed cost	$               75,000
	Break-event point	=Fixed cost/Contribution margin per sales mix
		=75,000/115
		650	Units
	Number of units of product B to be sold to break-even fixed cost of $75,000	=650 units *12/13
		600	Units