Question

Exercise 18-22 CVP analysis using composite units LO P4 points Handy Home sells windows and doors in the ratio of 8:2 (Windows doors). The selling price of each window is $104 and of each door is $254. The variable cost of a window is $64.50 and of a door is $177.00. Fixed costs are $564,000. (Enter your "per unit" values in two decimal places.) Skipped (1) Determine the selling price per composite unit. Quantity Windows Selling Price per unit Total per composite unit eBook Doors (2) Determine the variable costs per composite unit. Quantity Mindows Variable costs per unit Total per composite unit Doors References Contribution margin per composite unit $ 0.00 0.00 Contribution margin (3) Determine the break-even point in composite units. Choose Numerator Choose Denominator = Break Even Units Break even units Unit sales at break-even point (4) Determine the number of units of each product that will be sold at the break-even point Quantity Number of composite units to break even. Windows Doors Total

Answer 1

break even units are the ones where there is no loss no profit.

break even point is reached when total contribution margin = fixed costs

one composite unit consists of 8windows and 2 doors.

(1) selling price per unit

	quantity	selling price per unit	total per composite units
windows	8	$104	$832[8*104]
doors	2	$254	$508[2*254]
			$1,340[832+508]

(2) variable costs per composite units

	quantity	variable costs per unit	total per composite units
windows	8	$64.5	$516[8*64.5]
doors	2	$177	$354[2*177]
			$870

contribution margin = sales- variable cost

	sales	$1,340
Less	variable costs	$870
	contribution margin	$470	[1340-870]

(3) break even point in composite units

	choose numerator	denominator	break even units
	Total fixed costs/	contribution margin per composite unit	break even units
	$564,000	$470	1200 units

(4)

	quantity	number of composite units to break even	unit sales to break even
windows	8	1200	960[1200/10*8]
doors	2	1200	240[1200/10*2]

there will be 80%sales of windows and 20% of doors.

1200*80%=960

1200*20%=240