Calloway Computers sells three types of computers. Information on these is as follows: If the sales mix information and individual contribution margins given above remain the same, and fixed costs over the final three months of the year are $50,500, what is the expected break-even point for Calloway for this period?
A) 1,800 units
B) 1,980 units
C) 2,000 units
D) 2,020 units

Question

Calloway Computers sells three types of computers. Information on these is as follows:  If the sales mix information and individual contribution margins given above remain the same, and fixed costs over the final three months of the year are $50,500, what is the expected break-even point for Calloway for this period?
A) 1,800 units 
B) 1,980 units 
C) 2,000 units 
D) 2,020 units

Quizplus · Accepted Answer

The weighted average contribution margin (WACM) is calculated as: (CM F1F1F1S1?F1F1F10 Sales mix for laptop) + (CM F1F1F1S1?F1F1F10 Sales mix for tablet) + (CM F1F1F1S1?F1F1F10 Sales mix for desktop) = ($30 x .25) + ($25 x .55) + ($20 x .20) = $7.50 + $13.75 + $4.00 = $25.25. The $50,500 of fixed costs divided by the weighted- average contribution margin (WACM) results in a break-even point for Calloway of $50,500 ÷ $25.25 = 2,000 units.

Calloway Computers Sells Three Types of Computers