Question

Data for the next 2 questions:

Tamara Company sells two types of control systems – Basic and Deluxe - as follows:

Selling price per unit Variable expense per unit

Basic $120 $90

Deluxe $280 $220

Fixed monthly expenses total $300,000. The expected sales mix in units is 60% for product Basic and 40% for Deluxe.

1. How many units of each product must be sold each month in order to breakeven?

2. How many units of each product must be sold each month in order to make $150,000 profit per month?

Answer 1

				Basic	Deluxe
	Selling price per unit			120	280
	variable expense per unit			90	220
	contribution margin per unit			30	60
	Weighted average contribution = 30*.6+60*.4
				42
1)	units to be sold to breakeven = fixed cost/weighted average contribution
				300,000/42
				7,143
		product A	(7143*60%)			4,286
		product B	(7143*40%)			2,857.14
2)	(300,000+150,000)/42
	10,714
	product A					6,428
	product B					4,286