Question

Wagner Enterprise sells two products, large tractors and small tractors. A large tractor sells for $55,800 per unit with variable costs of $25,668 per unit. Small tractors sell for $30,600 per unit with variable costs of $14,688 per unit. Total fixed costs for the company are $1,512,000. 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?

Answer

_______ number of large tractors

Answer

______ number of small tractors

Answer 1

Solution

_____28__ number of large tractors

__42____ number of small tractors

Working

Working		Large Tractor	Small tractor	Total
A	Price	$             55,800.00	$            30,600.00
B	Variable Cost per unit	$             25,668.00	$            14,688.00
C = A - B	Contribution Margin	$             30,132.00	$            15,912.00
D	Product Mix	40.00%	60.00%	100.00%
E = C x D	Weighted Average Contribution Margin	$             12,052.80	$               9,547.20	$        21,600.00

.

A	Total Fixed Cost plus profit	$       1,512,000.00
B	Weighted Average Contribution Margin	$             21,600.00
C = A/B	Multi Product Break Even point	70
C x 40%	Large Tractor	28
C x 60%	Small tractor	42