Question

Sales Mix and Break-Even Analysis Megan Company has fixed costs of $978,040. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:

Product Selling Price Variable Cost per Unit Contribution Margin per Unit

QQ $360 $160 $200

ZZ 520 360 160 The sales mix for Products QQ

and ZZ is 90% and 10%, respectively. Determine the break-even point in units of QQ and ZZ. If required, round your answers to the nearest whole number. a. Product QQ 1,583.2 units b. Product ZZ 176 units

Answer 1

Megan Company

Break even point (company) = Fixed cost / Weighted average contribution per unit

Weighted average contribution per unit = (Product QQ Contribution per unit × 90%) + (Product ZZ Contribution per unit × 10%)

= ($ 200 per unit × 90%) + ($ 160 per unit × 10%)

= $ 180 + $ 16 = $ 196

Break even point = $ 978,040/$ 196

Break even point in units are 4,990 units

		Product QQ	Product ZZ
a	Sales mix	90%	10%
b	Total break even point in units	4,990	4,990
c	Product units at Break even point	(4,990×90%) = 4,491 units	(4,990×10%) = 4,99 units