Sales Mix and Break-Even Analysis Michael Company has fixed costs of $937,500. T

Question

Sales Mix and Break-Even Analysis

Michael Company has fixed costs of $937,500. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.

The sales mix for products Q and Z is 70% and 30%, respectively. Determine the break-even point in units of Q and Z. If required, round your answers to the nearest whole number.

a. Product Q  units

b. Product Z  units

Product Selling Price Variable Cost per Unit Contribution Margin per Unit Q $340 $160 $180 Z 220 140 80

Explanation / Answer

Breakeven Point = Fixed Cost/ Contribution Margin as per Sales Mix

= $ 937,500 / ( $ 126 +$ 24)

= 6,250 Units

Note:

a. Break Even Point of Q = 6,250 units *70%

= 4,375 Units

b.

Break Even Point of Z = 6,250 units *30%

= 1,875 Units

Product Selling Price Variable Cost per Unit Contribution Margin per Unit Sales Mix Contribution Margin as Per Sales Mix ( Contribution Margin * Sales Mix) Q 340 160 180 70% 126 Z 220 140 80 30% 24

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