Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are: Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?
A) 16,875 units
B) 30,100 units
C) 30,000 units
D) 11,250 units

Question

Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are:  Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?
A) 16,875 units 
B) 30,100 units 
C) 30,000 units 
D) 11,250 units

Quizplus · Accepted Answer

To calculate the break-even point, we need to first calculate the contribution margin per unit.

For product X: 
Selling price = $40 
Variable cost = $25 
Contribution margin = $15

For product Y: 
Selling price = $20 
Variable cost = $10 
Contribution margin = $10

Now we can calculate the weighted average contribution margin per unit:

Weighted average contribution margin per unit = (Contribution margin X units sold) / Total units sold 
= [(15 X 5000) + (10 X 35000)] / 40000 
= $9.25

Next, we can use the formula:

Break-even point (in units) = Fixed costs / Weighted average contribution margin per unit 
= $675,000 / $9.25 
= 30,000 units

Therefore, the answer is choice C, 30,000 units.

Rusty Co Sells Two Products, X and Y