Question

Exercise 18-22 CVP analysis using composite units LO P4 Handy Home sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $102 and of each door is $252. The variable cost of a window is $63.50 and of a door is $176.00. Fixed costs are $506,000. (Enter your "per unit" values in two decimal places.) (1) Determine the selling price per composite unit. Quantity Windows Doors Selling Price per unit Total per composite unit Variable costs per unit Total per composite unit (2) Determine the variable costs per composite unit. Quantity Windows Doors Contribution margin per composite unit $ 0.00 0.00 Contribution margin

Answer 1

	(1)
		Quantity (A)	Selling Price per unit (B)	Total per composite unit (A x B)
	Windows	8	$ 102	$ 816
	Doors	2	$ 252	$ 504
				$ 1,320
	(2)
		Quantity (A)	Variable costs per unit (B)	Total per composite unit (A x B)
	Windows	8	$ 63.50	$ 508
	Doors	2	$ 176	$ 352
				$ 860
	Contribution margin per composite unit
	Sales	$ 1,320
Less:	Variable costs	($ 860 )
	Contribution margin	$ 460
	3)
	Choose Numerator:	/	Choose Denominator:	=	Break Even Units
	Fixed Costs	/	Contribution margin per unit	=	Break even units
	$ 506,000	/	$ 460	=	1,100 Units
	4)
		Quantity (A)	Number of composite units to break even. (B)	Unit sales at break-even point (A x B)
	Windows	8	1,100	8,800
	Doors	2	1,100	2,200
				11,000