24. ABC Company has introduced a second product to its retail kiosks at the mall

Question

24. ABC Company has introduced a second product to its retail kiosks at the mall during the holiday season. t now sells remote control airplanes with a contribution margin of $20 and remote control helicopters with a contribution margin of $12. Research shows that the company is likely to sell 3 airplanes for every helicopter that it sells. Fixed costs will remain control toys are sold at breakeven? the same at $8,640 for the holiday season. How many total remote A. 540 remote control toys B. 480 remote control toys C. 270 remote control toys D. 120 remote control toys

Explanation / Answer

Answer is B - 480

Break even Point = fixed cost / weighted average contribution margin =8640/18 = 480 units

Fixed cost = 8640 weighted average contribution margin = ( sales ratio of airplanes*contribution margin)+(sales ratio of helicopter*contribution margin) = (.75*20)+(.25*12) = 18

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