Homework Answers
2. a. The variable cost of making 1 unit of a product ( in dollars) is 12. Therefore, the variable cost of making n units of the product is 12n.
Further, since the fixed cost of making the product is $ 25000., hence the total cost of making n units of the product is C(n) = 12n+25000.
Therefore, the average cost per unit is A(n) = C(n)/n = [12n+25000]/n = 12+(25000/n).
b. On substituting n = 100, we have A(100) = 12+25000/100 = 12+250 = $ 262.
Also, on substituting n = 1000, we have A(1000) = 12+25000/1000 = 12+25 = $ 37.
This means that the average cost per unit is $ 262 when 100 units are made and the average cost per unit is $ 37 when 1000 units are made.
c. Let the number of units to be made to reach an average cost per unit of $ 20 be n. Then 12+(25000/n) = 20 or, 25000/n = 20-12 = 8 or, n = 25000/8 = 3125.
Thus, the number of units to be made to reach an average cost per unit of $ 20 is 3125.
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Analysis
Conley Company has fixed costs of $17,802,000.
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contribution margin per unit
for the company’s two products follow:
Product Model
Selling Price
Variable Cost per Unit
Contribution Margin per Unit
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$99
$81
Zoro
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135
90
The sales mix for products Yankee and Zoro is 80% and 20%,
respectively. Determine the break-even point in
units of Yankee and Zoro.
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Sales Mix and Break-Even
Analysis
Conley Company has fixed costs of $17,802,000.
The unit selling price, variable cost per unit, and
contribution margin per unit
for the company’s two products follow:
Product Model
Selling Price
Variable Cost per Unit
Contribution Margin per Unit
Yankee
$180
$99
$81
Zoro
225
135
90
The sales mix for products Yankee and Zoro is 80% and 20%,
respectively. Determine the break-even point in
units of Yankee and Zoro.
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