Assume the following facts for two products,Zip and Zap:
$\begin{array}{ll}&zip&zap\
\text { Sales mix } & 3 \text { units }& 1 \text { units } \
\text { Selling price per unit } & \$ 21.00&\$28.00 \
\text { Variable costs per unit } & \$ 14.00&\$16.00
\end{array}$
If total fixed costs are $132,000,the break-even point in units would be ________.
A) 4,000 units of Zip and 12,000 units of Zap
B) 1,200 units of Zip and 400 units of Zap
C) 12,000 units of Zip and 4,000 units of Zap
D) 8,400 units of Zip and 2,800 units of Zap

Question

Quizplus · Accepted Answer

The contribution margin per unit for Zip is $7 ($21 - $14) and for Zap is $12 ($28 - $16). The weighted average contribution margin is calculated as [(3 units of Zip * $7) + (1 unit of Zap * $12)] / 4 = $8.25. The break-even point in units is $132,000 / $8.25 = 16,000 units. Given the sales mix, this translates to 12,000 units of Zip and 4,000 units of Zap.

Assume the Following Facts for Two Products,Zip and Zap If Total Fixed Costs Are $132,000,the Break-Even Point in Units