Question

Break-Even with Multiple Products Wagner Enterprise sells two products, large tractors and small tractors. A large tractor sells for $62,000 per unit with variable costs of $28,520 per unit. Small tractors sell for $34,000 per unit with variable costs of $16,320 per unit. Total fixed costs for the company are $1,560,000. Wagner Enterprises typically sells two large tractors for every three small tractors. Assuming the sales mix remains constant, how many large and small tractors are sold (in units) at Wagner's break-even point? number of large tractors number of small tractors

Answer 1

Number of large tractors	26
Number of small tractors	39

Working:

	Large Tractor	Small Tractor
Selling price	62000	34000
Less: Variable Expenses	28520	16320
Contribution per tractor	33480	17680

Now suppose small tractor sold is = 3X

Then large tractor will be = 2X

So at break even point total contribution will be equal to fixed cost

So Contribution x unit for Large tractor + Contribution x units for small tractor = Fixed cost

33480 x 2X + 17680 x 3X = $1,560,000

$120,000x = $1,560,000

X = $1560000/120000 =13

So large tractor sold = 2 x 13 = 26

Small Tractor = 3 x 13 = 39