Multiple Products Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan, Inc., are the following for a typical year:
Product | Units Sold | Sales Mix |
A | 18,000 | 80% |
B | 4,500 | 20 |
Total | 22,500 | 100% |
Assume the following unit selling prices and unit variable costs:
Product | Selling Price | Variable Cost per Unit | Unit Contribution Margin |
A | $ 80 | $ 65 | $15 |
B | 140 | 100 | 40 |
Fixed costs are $400,000 per year, of which $60,000 are batch-related and $340,000 are facilitiesrelated. Assume sales mix is constant in units.
Required
1. Determine the breakeven point in units.
2. Determine the number of units required for a before-tax net profit of $40,000.
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