Question

The Riley Corporation manufactures baseball bats and balls for the league teams. For every 3 bats sold, 5 balls are sold. Bats sell for $18 each, while balls sell for $6 each. Manufacturing variable costs for the bats are $6 each and for the balls $2 each. Calculate the break-even point in dollars for Riley if the fixed costs are $180,000. (Round your answer to the nearest whole unit).

Select one:

a. $ 295,714

b. $ 25,714

c. $ 540,000

d. $ 270,006

Answer 1

Answer is d. $ 270,006

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Ratio of Sales between bat and Ball	03:05
That is
Bat	3	Unit
Ball	5	Unit
Total Fixed Cost	$              1,80,000

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Apportionment of Fixed Cost to Calculate Break even point
Bat	$                 67,500	(180000*3/8)
Ball	$              1,12,500	(180000*5/8)

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Contribution Margin
	Bat	Ball
Sales Price Per Unit	$                          18	$                          6
Less: Variable Cost Per unit	$                            6	$                          2
Contribution Margin Per unit	$                          12	$                          4

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Break even Point (Unit)
Bat	5625	(67500/12)
Ball	28125	(112500/4)

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Break even Point (in Dollar)
Bat	$              1,01,250	(5625*$18)
Ball	$              1,68,750	(28125*$6)
Total	$              2,70,000

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The difference of $6 may be due to rounding difference while calculating through alternative way.

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Hope you understood.