Riku Company manufactures two products. The budgeted per-unit contribution margi

ID: 2406082 • Letter: R

Question

Riku Company manufactures two products. The budgeted per-unit contribution margin for each product follows:

Riku expects to incur annual fixed costs of $540,000. The relative sales mix of the products is 70 percent for Super and 30 percent for Supreme.

Required

Determine the total number of products (units of Super and Supreme combined) Riku must sell to break even.

How many units each of Super and Supreme must Riku sell to break even?

Super Supreme Sales price $ 68 $ 94 Variable cost per unit (38 ) (44 ) Contribution margin per unit $ 30 $ 50

$38

44.12%

($30/$68)*100

53.19%

($50/$94)*100

Combined contribution margin

44.12%*70/100 + 53.19%*30/100 = 46.84%

Break even sales = $540,000/46.84% = $1,152,860

Break even sales mix

Super : $1,152,860*70% = $807,002

Supreme : $1,152,860*30% = $345,858

Super Supreme Sales price $68 $94 Variable cost per unit

$38

$44 Contribution margin $30 $50 Individual product Contribution margin

44.12%

($30/$68)*100

53.19%

($50/$94)*100

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