COST ACCOUNTING - MULTIPLE PRODUCT BREAK EVEN POINT XYZ manufactures two producs

Question

COST ACCOUNTING - MULTIPLE PRODUCT BREAK EVEN POINT

XYZ manufactures two producs, GT 100 and GT 200 that have the following sales and cost information:

What is the breakeven point in the units of GT 100 and units of GT 200 if XYZ typically sells 3,000 units of GT 100 and 2,500 units of GT 200? Please show your work.

GT 100 GT 200 Total Sales $25,000 $75,000 $100,000 - Variable Costs (19,000) (37,500) (56,500) Contribution Margin 6,000 37,500 43,500 - Fixed Costs (19,140) Operating Income $24,360

Explanation / Answer

Ratio of GT 100 = 25000/100000 = 25%

Ratio of GT 200 = 75000/100000 = 75%

Per unit contribution of GT 100 = 6000/3000 = $2 per unit

Per unit contribution of GT 200 = 37500/2500 = $15 per unit

Combined contribution per unit = (2*25%) + (15*75%) = $11.75

Combined Break Even = 19140 / 11.75 = 1,629 units

Units of GT 100 = 1629 x 25% = 407 units

Units of GT 100 = 1629 x 75% = 1,222 units

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