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 2:1 (desk unit:chair). The selling prices are $1,270 per desk unit and $520 per chair. The variable costs are $770 per desk unit and $270 per chair. Fixed costs are $87,500.

Required:

1. Compute the selling price per composite unit.

2. Compute the variable costs per composite unit.

3. Compute the break-even point in composite units. Break-even point ? composite units

4. Compute the number of units of each product that would be sold at the break-even point.

Desk Chairs

Unit sales ? units ? units

Explanation / Answer

(1) Selling price per composite unit = 1270 x 2 + 520 x 1 = $3060 (2) Variable cost per composite unit = 770 x 2 + 270 x 1 = $1810 (3) Contribution per composite unit = 3060 - 1810 = $1250 Breakeven point in composite unit = 87500/1250 = 70 composite unit (4) Breakeven point for: Desks: 70 x 2 = 140 desks Chair: 70 x 1 = 70 chairs Hope this helps!

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