Question

Zara Builders Inc. produces two products, A and B. The following information is presented for both products: $36 $24 Selling price per unit Variable cost per unit 28 Total fixed costs are $234,000. (2 marks) Required: calculate the contribution margin for each product sutribution marging SP- UCRU 36-28 dritentier Margin of B = 24.12 = 12 b. Calculate break-even point in units of both A and B if the sales mix is 3 units of A for every unit of B (i.e., 75% of sales are from A and 25% of sales are from B). (4 marks) Pant in Unntschadt Fc

Answer 1

BBreak even Point in units are cleared explained in Steps

A B Particulars Selling Price per Unit Variable Cost per unit contribution per Unit = Selling Price - Variable Cost Contribution Margin = Contribution per Unit/ Selling Price* 100 36 28 24 12 8 Step1: Calculation of Contribution per unit Calculated in a. Step2: Calculation of Weighted average contribution per unit Weighted average Contribution per Unit* Sales mix =A's Contribution per Unit* Al Sales Mix percentage +B's Contribution per Unit * B' Sales Mix Percentage =8*75%+12*25% =6+3 22.22% 50% Step3: Calculate Total units of Sales Mix required to break even using the formula Break even point in units of Sales Mix =Total fixed Cost/ Weighted average Contribution per Unit =234000/9 =26000 Units Step 4: Calculate number units of product A,B at break even Point Product A B Sales mix ratio- 1 75% 25% Total break even units - 2 26000 26000 Product unit at break even Point - 1*2 19500 26000