Question

Following is information about the Eclypso Company's two products

​	Product X	Product Y
Unit selling price	$10.00	$10.00
Unit variable costs:	​	​
Manufacturing	$6.00	$7.00
Selling	1.00	1.00
Total variable costs	$7.00	$8.00
​	​	​
Monthly fixed costs are as follows:	​	​
Manufacturing	$90,000	​
Selling and administrative	50,000	​
Total fixed costs	$140,000	​

​

What is the total monthly sales volume in units required to break-even when the sales mix in units is 80% Product X and 20% Product Y?

	a.	8,333 units
	b.	56,667 units
	c.	16,667 units
	d.	50,000 units

Answer 1

The correct answer is d) 50,000 units.

Supporting calculations:

	Product X	Product Y
Unit selling price (b)	$10	$10
Less: Variable costs:
Manufacturing	($6)	($7)
Selling	($1)	($1)
Contribution margin per unit (a)	$3	$2
Contribution margin ratio (c = a / b)	0.3	0.2
Percentage to Sales (d) (given)	0.8	0.2
Average Contribution Margin (c * d)	0.24	0.04
Total average Contribution Margin (e ) (0.24 + 0.04)	0.28

Total Fixed Costs (W)	$140,000
Total average Contribution Margin (X)	0.28
Total monthly sales dollars required to break-even (Y = W / X)	$500,000
Unit selling price per unit (Z)	$10
Total monthly sales volume in units required to break-even (Y /Z)	50,000

Therefore, monthly sales volume in units required to break-even is 50,000 units.