Valley Company sells two products. Product M sells for $12 and has variable costs per unit...

Valley Company sells two products. Product M sells for $12 and has variable costs per unit of $7. Product Q’s selling price and variable costs are $15 and $10, respectively. If fixed costs are $60,000 and Valley sells twice as many units of Product M as Product Q, what is the break-even point in units for Product M?

Expert Solution

Break even point for standard mix = Fixed cost/Weighted average contribution margin per unit
= $60000/$5
= 12000

Break even point for Product M = 12000 units/3 units x 2 units = 8000 units

Contribution margin for Product M	$12-$7 = $5
Contribution margin for Product Q	$15-$10 = $5

Contribution margin per standard mix	(2x$5) + $5
	$15

Average contribution margin per unit	$15/3units
	$5

ekkarill92 answered 1 year ago

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