Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $34, $44, and $54, respectively. Variable costs per unit are $24, $29, and $32, respectively. Fixed costs are $533,000. What is the break-even point in composite units

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05-07-2022
Business

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Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $34, $44, and $54, respectively. Variable costs per unit are $24, $29, and $32, respectively. Fixed costs are $533,000. What is the break-even point in composite units

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tripatsingh039 tripatsingh039 · Answer 1 · 2022-07-16T12:31:38-04:00

The break even point in composite units is 5000 units.

Break even point

The Break-even point is calculated by dividing the fixed cost by the contribution margin per unit.

For this sales mix, the contribution margin per unit is the aggregate of each contribution margin. Contribution margin is calculated by subtracting variable cost from the selling price

Contribution margin for A is $20- $12 = $8 x 3 units

Contribution margin for B is $ 30 - $18 = $12 x 2 units

Contribution margin for C is $40 -$24= $16 x 1 unit

Total contribution margin per unit will be

(8 x 3) x (12 x 2 ) x( $16 x 1)= $64

Break-even point = $320,000 /64

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