Question

Oriole Industries sells two electrical components with the following characteristics. Fixed costs for the company are $490,000 per year.

		XL-709		CD-918
Sales price		$33.00		$48.00
Variable cost		29.00		40.00
Sales volume		98,000 units		147,000 units

How many units of each product must Oriole Industries sell in order to break even?

Answer 1

Calculating Break Even in Units:-

Break Even in Units={Fixed Costs/(Sales price per unit - Variable Cost per unit)}

Calculating Break Even in Units for XL - 709:-

Break Even in Units={$490,000/($33-$29)}

=($490,000/$4)

=122,500 Units

Calculating Break Even in Units for CD - 918:-

Break Even in Units={$490,000/($48-$40)}

=($490,000/$8)

=61,250 Units

So Oriole Industries must sell 122,500 units of XL - 709 and 61,250 units of CD - 918 product.