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23 September, 03:26

Following is the information about Eclypso Company's two products: Product X Product Y Unit selling price $10.00 $10.00 Unit variable costs: Manufacturing $ 6.00 $ 7.00 Selling 1.00 1.00 Total variable costs $ 7.00 $ 8.00 Monthly fixed costs are as follows: Manufacturing $ 90,000 Selling and administrative 50,000 Total fixed costs $140,000 What is the total monthly sales volume in units required to break even when the sales mix in units is 80% of Product X and 20% of Product Y?

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  1. 23 September, 06:08
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    50,000 units are required to break even

    Explanation:

    Eclypso Company

    Product X Product Y

    Unit selling price $10.00 $10.00

    Less

    Unit variable costs:

    Manufacturing $ 6.00 $ 7.00

    Selling 1.00 1.00

    Total variable costs $ 7.00 $ 8.00

    Contribution Margin per unit 3 2

    Monthly fixed costs are as follows:

    Manufacturing $ 90,000

    Selling and administrative 50,000

    Total fixed costs $140,000

    Weighted Contribution Margin per unit = ($3 * 80% + $ 2 * 20%) = 2.4 + 0.4=

    $ 2.8

    Combined Break Even Volume = Fixed Costs / Weighted Contribution Margin Per unit

    Combined Break Even Volume = $ 140,000 / 2.8=50,000
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