Zed Company sells two kinds of mainframe computer power supplies.The company projected the following cost information for the two products: $\begin{array}{lrr}
&\text { Standard } & \text { Heavy-Duty } \
&\text { Supply } & \text { Supply }\
\text { Unit selling price} &\$250&\$120\
\text { Unit variable cost} &\$110&\$50\
\text { Number of units produced and sold } &7,000&3,000
\end{array}$
Assume that total fixed costs are $428,400.How many units of the standard supply unit would be included in the total number of units required to break even with the projected sales mix? (Round your answer to the nearest whole unit)
A) 3,600 units
B) 2,520 units
C) 1,080 units
D) 2,040 units

Question

Zed Company sells two kinds of mainframe computer power supplies.The company projected the following cost information for the two products: $\begin{array}{lrr}
&\text { Standard } & \text { Heavy-Duty } \
&\text { Supply } & \text { Supply }\
  \text {  Unit selling price} &\$250&\$120\
 \text {  Unit variable cost} &\$110&\$50\
 \text { Number of units produced and sold } &7,000&3,000
\end{array}$
 Assume that total fixed costs are $428,400.How many units of the standard supply unit would be included in the total number of units required to break even with the projected sales mix? (Round your answer to the nearest whole unit)
A) 3,600 units
B) 2,520 units
C) 1,080 units
D) 2,040 units

Quizplus · Accepted Answer

To find the total number of units required to break even, we need to calculate the weighted average contribution margin per unit, which is:
[(40 x $220) + (60 x $550)] / 100 = $430
Breaking even means that the total contribution margin equals the total fixed costs, so we can solve for the total number of units required: 
$428,400 / $430 = 996
To find how many units of the standard supply unit (which has a contribution margin of $40) are included in this total, we can set up the equation: 
$40x + $60y = $428,400
where x is the number of standard supply units and y is the number of deluxe supply units. We know that the total number of units is 996, so we can write: 
x + y = 996
Solving for y, we get: 
y = 996 - x
Substituting this into the first equation and simplifying, we get: 
$40x + ($60 x (996 - x)) = $428,400
Solving for x, we get: 
x = 2,520
Therefore, the answer is B: 2,520 units of the standard supply unit would be included in the total number of units required to break even with the projected sales mix.

Zed Company Sells Two Kinds of Mainframe Computer Power Supplies