In: Accounting
Brief Exercise 6-8
NoFly Corporation sells three different models of a mosquito
“zapper.” Model A12 sells for $60 and has variable costs of $43.
Model B22 sells for $111 and has variable costs of $79. Model C124
sells for $402 and has variable costs of $309. The sales mix of the
three models is A12, 60%; B22, 27%; and C124, 13%.
If the company has fixed costs of $225,789, how many units of each
model must the company sell in order to break even?
(Round Per unit values to 2 decimal palces, e.g. 15.25
and final answers to 0 decimal places, e.g.
5,275.)
Model | ||
A12 | ||
B22 | ||
C124 |
Total break-even | units |
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Answer | ||||
Model A12 |
Model B22 | Model C124 | ||
Sellig price | $ 60 | $ 111 | $ 402 | |
Variable costs | $ 43 | $ 79 | $ 309 | |
Contribution mergin | $ 17 | $ 32 | $ 93 | |
Weighted average contribution margin = (17*60%)+(32*27%)+(93*13%)= | 30.93 | |||
Total break even units = Fixed costs/Weighted average contribution margin | ||||
225789/30.93= | 7,300 | |||
Units to break even: | ||||
Model A12 | 4,380 | 7300*60% | ||
Model B22 | 1,971 | 7300*27% | ||
Model C124 | 949 | 7300*13% |