Question

The Terrence Co. manufactures two products, Baubles and Trinkets. The following are projections for the coming year:

	Baubles						Trinkets
	12,000 units						6,000 units
Sales				$	12,000					$	12,000
Costs:
Fixed	$	2,900					$	6,760
Variable		7,200			10,100			3,000			9,760
Income before taxes				$	1,900					$	2,240

How many Baubles will be sold at the break-even point, assuming that the facilities are jointly used with the sales mix remaining constant?

rev: 10_26_2018_QC_CS-145247

A. 7,250

B. 8,400

C. 11,270

D. 14,490

Answer 1

	Baubles	Trinkets
Sales units	12000	6000
Sales mx percentage	66.67%	33.33%
Sales	12000	12000
Less: Variable costs	7200	3000
Contribution margin	4800	9000
Contribution margin per unit	0.40	1.50
Weighted average Contribution margin per unit=(0.40*66.67%)+(1.50*33.33%)=$0.7667
Overall break even point = (2900+6760)/0.7667= 12600 units
Baubles units sold at the break-even point = 12600*66.67% = 8400
Option B 8,400 is correct