Question

Montelone Images, A photography studio, sells two photo packages. The standard package has a contribution margin of $5, and the deluxe package has a contribution margin of $12. Montelone sells five standard packages for every one deluxe package. if fixed expenses total $74,000, how many standard and deluxe packages must be sold to break even?

Answer 1

Weighted average contribution margin = (Standard package Contribution margin * 5 + Deluxe package contribution margin * 1) / (5+1)

= ($5 * 5 + $12 * 1) / 6

= $37 / 6

= $6.167

Break even point in units = Fixed cost / weighted average contribution margin

= $74,000 / $6.167

= 12,000 units

Standard units = 12,000 units * (5/6)

= 10,000 units

Deluxe units = 12,000 units * (1/6)

= 2,000 units