Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 46

Multiple Products Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan, Inc., are the following for a typical year:

Product	Units Sold	Sales Mix
A	18,000	80%
B	4,500	20
Total	22,500	100%

Assume the following unit selling prices and unit variable costs:

Product	Selling Price	Variable Cost per Unit	Unit Contribution Margin
A	$ 80	$ 65	$15
B	140	100	40

Fixed costs are $400,000 per year, of which $60,000 are batch-related and $340,000 are facilitiesrelated. Assume sales mix is constant in units.

Required

1. Determine the breakeven point in units.

---

2. Determine the number of units required for a before-tax net profit of $40,000.

Step 1 of 22

Breakeven Point:

Break even for the company will be when the production cost is equal to the total revenue. Break even for the following year can be calculated as follows: