Business Solutions sells upscale modular desk units and office chairs in the rat

Question

Business Solutions sells upscale modular desk units and office chairs in the ratio of 4:2 (desk unit:chair). The selling prices are $1,160 per desk unit and $410 per chair. The variable costs are $660 per desk unit and $160 per chair. Fixed costs are $387,500. 1. What is the selling price per composite unit? 2. What is the variable costs per composite unit? 3. What is the break-even point in composite units? 4. Compute the number of units of each product that would be sold at the break-even point. How many desks? How many chairs?

Explanation / Answer

Contribution per desk = 1160 - 660 = $500 Contribution per chair = 410 - 160 = $250 (1) Selling price per composite unit = 1160 x 4 + 410 x 2 = $5460 (2) Variable cost per composite unit = 660 x 4 + 160 x 2 = $2960 (3) Contribution per composite unit = $5460 - $2960 = $2500 Breakeven point in composite unit - 387500/2500 = 155 (4) Number of desks: 4 x 155 = 620 Number of chairs: 2 x 155 = 310 Hope this helps!

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