Question

please help me answer this by 8:25pm!! thank you

A company produces Product 11 and Product 22. Product 11 sells for $31 and has a contribution margin ratio of 60%. Product 22 sells for $39 and has a contribution margin ratio of 60%. This year the company sold 1650 units of Product 11 and 2750 units of Product 22. At the breakeven point, the company needs to sell 1245 units of Product 11. What are the company's fixed costs? O $61752 O $77688 O $67728 O $71712

Answer 1

Solution:

Answer: $71,712 is the correct answer

Explanation:

Company Break Even point in Dollars = Company Fixed Cost / Company Contribution margin ratio

Therefore,

Fixed Cost = break even point in Dollars * Contribution Margin Ratio

= $119,520 * 60%

= $71,712

Working: Calculation of Break even point in $ for Company

Given,

Break Even point for Product 11 = 1245 units

Therefore, according to sales mix given, Break even point for Product 22 will be =

= (Break Even sales Product 11 / Total Sales of product 11) * Total Sales of product 22

= (1,245 Unit / 1,650 Units) * 2,750 Units

= 2,075 Units

Total Break even sales in $ = (1,245 Units * $31) + (2,075 Units * $39)

= $38,595 + $80,925

= $119,520

Working: Calculation of Company Contribution Margin

Company Contribution Margin = (Total Contribution Margin / Total Sales Revenue)

= [(1,650 Unit * $31 * 60%) + (2,750 Unit * $39 * 60%)] / [(1,650 Unit * $31) + (2,750 Unit* $39)]

= ($30,690 + $64,350) / ($51,150 + $107,250)

= $95,040 / $158,400

= 0.6

=60%