The data below pertain to two types of products manufactured by Cobb Corp. Fixed costs total...

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The data below pertain to two types of products manufactured by Cobb Corp. Fixed costs total...

The data below pertain to two types of products manufactured by Cobb Corp. Fixed costs total $300,000 annually. The expected mix in units is 60% for product Y and 40% for product Z.

Per Unit

Sales Price

Variable Costs

Product Y

$120

$ 70

Product Z

500

200

How much is Cobb’s breakeven point in dollars?

A) $400,000

B) $300,000

C) $420,000

D)$544,000

business accounting

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Answer 1

Answer #1

computation of breakeven point

breakeven point = TFE / (WS - WV)

TFE = Total Fixed Expenses

WS = Weighted average selling price = (Sale price of product A × Sales percentage of product A) + (Sale price of product B × Sale percentage of product B) + ...

WV = Weighted average variable cost per unit = (Variable expenses of product A × Sales percentage of product A) + (Variable expenses of product B × Variable expenses of product B) +...

Breakeven point = $300,000/ ($272-$122) = $300,000/ $150 = 2,000 units

* WS = $120*60% + $500*40% = $72+$200 = $272

** WV = $70*60% + $200*40% = $42+$80 = $122

Computation of breakeven point in Dollars

The company will have to sell 2,000 units to break-even. Now compute the number of units of each product to be sold:

product y = 2,000*60% = 1,200

product z = 2,000*40% = 800

As the number of units of each individual product to be sold have been computed, now compute the break even point in dollars as follows

product y = 1,200*$120 = $144,000

product z = 800*$500 = $400,000

breakeven point in dollars = $544,000 (Option d)

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Answer 2

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