Solution: Alternate Demo Problem Twenty-One
Problem #1
(a) Break-even point (in units) = Fixed costs/CM per unit
(or)
Break-even point (in dollars) = Fixed costs/CM ratio
$32,000/[($40 per unit –$16 per unit)/$40 per unit] = $80,000
$80,000 dollars/$40 per unit = 2,000 units
2,000 units x $44 per unit = $88,000
(d) Break-even point (in units) = Fixed costs/CM per unit
New fixed costs = $32,000 – $8,000 = $24,000
New CM = $40 per unit – $26.40 per unit = $13.60 per unit
$24,000/$13.60 per unit = 1,765 units
1,765 units x $40 per unit = $70,600
Solution: Alternate Demo Problem Twenty-One
Problem #2
Selling Price per Composite Unit
Doors: 2 x $350 700
1,700
Composite Contribution Margin $900
Breakeven point in Composite Units:
Fixed Costs $900,000 = 1,000
Composite Contribution Margin $900
Number of units of each product to sell to break even
Windows: 8 x 1,000 = 8,000
Doors: 2 x 1,000 = 2,000
Composite Units to sell to achieve target Income: