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Nyota Corp sells two products. Product A sells for $100 per unit, and has unit v

ID: 2428167 • Letter: N

Question

Nyota Corp sells two products. Product A sells for $100 per unit, and has unit variable costs of $60. Product B sells for $70 per unit, and has unit variable costs of $50. Currently, Nyota sells three units of product B for every one unit of product A sold. Nyota has fixed costs of $750,000. What is Nyota's break-even point in units?

   30,000 units of A and 30,000 units of B

   7,500 units of A and 22,500 units of B

   22,500 units of A and 7,500 units of B

   15,000 units of A and 15,000 units of B

Explanation / Answer

Product Contribution
===========                       Product A       Product B
Selling price                           $100              $70
Less : Variable costs               $60                 $50
Contribution Margin                $40                 $20

Product-Mix
==========

30,000 units of A and 30,000 units of B
(30,000 x $40 ) + (30,000 x $20) = $1,800,000

7,500 units of A and 22,500 units of B
   (7,500 x $40 ) + (22,500 x $20) = $750,000    

22,500 units of A and 7,500 units of B
(22,500 x $40 ) + (7,500 x $20) = $1,800,000    

15,000 units of A and 15,000 units of B
(15,000 x $40 ) + (15,000 x $20) = $900,000