Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is a. 6,300 units b. 10,500 units c. 8,000 units d. 12,600 units

The correct answer is (b) 10,500 units

Explanation:

Solution

Recall that,

The weighted contribution average margin per unit is computed below:

Weighted average contribution margin = The Total contribution margin/Total sold units

Thus,

(8,000 * $30 + (2000 * $60)/ 8000 + 2000

which is

$ 360,000/10,000 = $ 36 per unit.

Now,

We calculate for the break even points in unit

Break-even units Fixed costs / Weighted average contribution margin

$378,000./$ 36 = 10, 500 units

Therefore the break even point is 10, 500 units

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