In: Accounting
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Brief Exercise 19-8
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NoFly Corporation sells three different models of a mosquito
“zapper.” Model A12 sells for $58 and has variable costs of $41.
Model B22 sells for $102 and has variable costs of $75. Model C124
sells for $413 and has variable costs of $316. The sales mix of the
three models is A12, 58%; B22, 27%; and C124, 15%.
If the company has fixed costs of $208,269, 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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| A12 | B22 | C124 | ||
| Unit selling price | $ 58 | $ 102 | $ 413 | |
| Unit variable cost | $ 41 | $ 75 | $ 316 | |
| Unit contribution margin | $ 17 | $ 27 | $ 97 | |
| Sales mix | 58% | 27% | 15% | |
| Weighted average CM = 17*58%+27*27%+97*15% = | $ 31.70 | |||
| Break even point in composite units = Fixed costs/Weighted average CM per unit = 208269/31.70 = | 6570 | Composite Units | ||
| Number of units of individual products | A12 | B22 | C124 | `Total | 
| to be sold = 6570*% in sales mix = | 3811 | 1774 | 986 | 6570 |