Daybreak Corporation manufactures and sells two products: A and B. The operating

Question

Daybreak Corporation manufactures and sells two products: A and B. The operating results of the company are as follows:

Product A

Product B

3,000

4,000

$12

$7

6

4

In addition, the company incurred total fixed costs in the amount of $10,000.

a.

Refer to Daybreak Corporation. How many total units would the company have needed to sell to break even?

333

1,111

2,333

3,332

b.

Refer to Daybreak Corporation. If the company had sold a total of 10,500 units, consistent with CVP assumptions, how many of those units would be Product B?

5,250

6,000

7,000

7,875

c.

Refer to Daybreak Corporation. How many units would the company need to sell to produce a before-tax profit of $20,000?

6,000

6,250

6,923

7,000

Product A

Product B

Sales in units

3,000

4,000

Sales price per unit

$12

$7

Variable costs per unit

6

4

Explanation / Answer

a Sales mix: Product A 42.8571% Product B 57.1429% Weighted average unit contribution margin=(12-6)*42.8571%+(7-4)*57.1429%= $4.2857 Break even point =10000/4.2857 = 2333 b Units of product B = 10500*57.1429%= 6000 c Units to be sold=(10000+20000)/4.2857= 7000

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