Homework Answers
Break Even point (BEP) of Product A & B with profit = $0:
| Description | Ref | Product A | Product B | Total |
| Selling price per unit | A | 15.00 | 10.00 | 25.00 |
| Variable Price per unit | B | 7.00 | 6.00 | 13.00 |
| Contribution Margin per unit | C=A-B | 8.00 | 4.00 | 12.00 |
| Proportion | D | 1.00 | 1.80 | 2.80 |
| Proportion in % (i.e) Product A=1/2.8 & Product B=1.8/2.8 | E | 36% | 64% | 100% |
| Weighted Average contribution Margin per unit | F=C*E | 2.88 | 2.56 | 5.44 |
| Total Fixed Cost | G | 140,000 | ||
| BEP (in units) (rounded off to 0 decimal places) | H=G/F | 25,735.00 | ||
| BEP product wise (in units) (rounded off to 0 decimal places) | H*E | 9,265.00 | 16,470.00 |
Break Even point (BEP) of Product A & B with profit = $20,000:
# of units to produce desired profit = (Desired profit in $ divided by Contribution Margin per unit) + Break Even units
= (20,000/5.44) + 25735
= 3,676+25735
= 29,411 units
Allocate between Product A & Product B in same proportion as table above (i.e.) 36% & 64%
Product A = 29411*36% = 10588 units (rounded off)
Product B = 29411*64% = 18823 units (rounded off)
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