Question

Yerke Company makes and sells jungle gyms and tree houses for children. For jungle gyms, the price is $120 and the variable expenses are $90 per unit. For tree houses, the price is $200 and the variable expenses are $100. Total fixed expenses are $253,750. Next year, Yerke expects to sell 12,000 gyms and 8,000 tree houses. What is the total sales revenue at the break-even point?

a.$411,250 b.$140,000 c.$665,000 d.$253,700 e.$1,076,250

Yerke Company makes and sells jungle gyms and tree houses for children. For jungle gyms, the price is $120 and the variable expenses are $90 per unit. For tree houses, the price is $200 and the variable expenses are $100. Total fixed expenses are $253,750. Next year, Yerke expects to sell 12,000 gyms and 8,000 tree houses. What is the number of jungle gyms sold by Yerke at the break-even point?

a.668

b.1,002

c.1,750

d.2,625

e.875

Answer 1

Requirement 1: C. $ 665,000

Working:

Total Sales revenue [(12000*120)+(8000*200)]	$       3,040,000
Less: Total variable cost [(12000*90)+(8000*100)]	$       1,880,000
Total contribution margin	$       1,160,000
Contribution margin ratio [1160000/3040000]	38.16%
Break even sales [253750/38.16%]	$          665,000

Requirement 2: d. 2,625

Working:

Jungle gyms contribution margin [120-90]	$                    30
Tree house contribution margin [200-100]	$                  100
Sales Mix:
Jungle gyms [12000/20000]	0.6
Tree house [8000/20000]	0.4
Weighted average contribution margin [(30*0.6)+(100*0.4)]	$                    58
Total Fixed cost	$          253,750
Total break even sales units [253750/58]	4375
Break even units for jungle gym [4375*0.60]	2625