Question

4) 14%-XYZ Company annually sells 2000 units of product A and 8000 units of product B. Product A sells for $10 and has a variable costof $6 to manufacture. Product B sells for $8 and a variable cost of $6 to manufacture. a) 500-How many units ofA & B must be sold for the company to breakeven? Fixed costs are $12,000 b) 5% . How would your answer change if the sales mix was 8000 of product A and 2000 of product B? c) 4%-What would you recommend to management about the sales mix of product A &B ?

Answer 1

Solution a)

Number of units of A for the company to reach Break Even Point = 1000 units

Number of units of B for the company to reach Break Even Point = 4000 units

Solution b)

Number of units of A for the company to reach Break Even Point = 2666.67 units

Number of units of B for the company to reach Break Even Point = 666.67 units

Solution c)

Sales mix of A 8000 units and B 2000 units is recommended, becasue BEP for this Sales mix is only 3333.3 units as compared with Sales mix of A 2000 and B 8000 whose BEP is 5000 units is very large. We can reach the BEP units to get back our fixed cost very fastly through sales mix of A 8000 units and B 2000 units.