Question

E6.6 (LO 2), AP Yard Tools manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and unit contribution margin aro as follows. Compute break-even point in units for a company with more than one product Unit Contribution Margin Sales Mix Lawnmowers $30 20% Weed-trimmers $20 50% Chainsaws $40 30% Yard Tools has fixed costs of $4,200,000. Instructions Compute the number of units of each product that Yard Tools must sell in order to break even under this product mix

Answer 1

Answer- Break even units- Lawnmowers = 30000 units

Weed-trimmers = 75000 units

Chainsaws = 45000 units

Explanation-Break-even volume = Fixed costs/ Weighted average contribution margin ratio

= $4200000/$28 per unit

= 150000 units

Lawnmowers = 150000 units*20%= 30000 units

Weed-trimmers = 150000 units*50%= 75000 units

Chainsaws = 150000*30%= 45000 units

Where- Weighted average contribution margin per unit =Contribution margin per unit* Sales mix percentage

= ($30*20%)+($20*50%)+($40*30%)

= 6 per unit+ $10 per unit+ $12 per unit    

= $28 per unit