Question

The following information is for the Jeffries​ Corporation:

Product​ A: Revenue $ 15.00

Variable Cost $ 10.00

Product​ B: Revenue $ 33.00

Variable Cost $ 18.00

Total fixed costs $ 399,000

What is the breakeven​ point, assuming the sales mix consists of three units of Product A and one unit of Product B?

A. 39,900 units of A and 13,300 units of B

B. 12,091 units of A and 4,030 units of B

C. 13,300 units of A and 39,900 units of B

D. 79,800 units of A and 0 units of B

Answer 1

Product A contribution margin = $15 - $10 = $5

Product B contribution margin = $33 - $18 = $15

Contribution margin if 3 units of product A is sold = 3 X $5 = $15

Contribution margin if 1 units of product B is sold = $15

Total Contribution is $15 + $15 = $30

If 3 units of product A and 1 units of product B is sold, the contribution from product A and product B is $15 each. ie. 50% Contribution is from product A and 50% contribution is from product B.

At breakeven point, Fixed cost equals to Contribution margin.

$399,000 is Contribution margin.

50% is contributed by product A and 50% is contributed by product B.

$399,000 X 50% = $199,500 each by both the products.

Number of units of each product to be sold:

Product A: $199,500 / $5 = 39,900 units

Product B: $199,500 / $15 = 13,300 units

Option A