Question

QUESTION 24 Yerke Company makes jungle gyms and tree houses for children. For jungle gyms, the price is $120 and variable expenses are $90 per unit. For tree houses, the price is $200 and variable expenses are $100. Total fixed expenses are $253.750. Last year. Yerke sold 12.000 gyms and 4.000 tree houses. Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units. What is the number of tree houses sold at break-even? a. 668 ob. 875 c. 1,002 d. 2.625 e. 1,750

Answer 1

Break-even point in units for the two products=Total fixed cost/Weighted average contribution mergin per unit
Weighted average contribution margin per unit=Weight of the product*Contribution margin per unit
Weight of the product=Demand for the product/Total demand for two products
Total demand for two products=12000+8000=20000 units
Contribution margin per unit=Selling price-Variable expenses
Weighted average contribution margin per unit:
Product	Selling price	Variable expense	Contribution margin per unit	Weight	Weighted average contribution margin per unit:
	a	b	c=a-b	d	c*d
Gym	120	90	30	0.6	18
				(12000/20000)
Tree	200	100	100	0.4	40
				(8000/20000)
Total					58
Break-even point in units for the two products=253750/58=4375
Break-even point in units for the tree houses sold=Weight of the tree houses sold*Break-even point in units for the two products=0.40*4375=1750
Answer is
e. 1750