Exercise 22-17 CVP analysis using composite units L.O. P4 Home Builders sells wi
ID: 2347226 • Letter: E
Question
Exercise 22-17 CVP analysis using composite units L.O. P4Home Builders sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $120 and of each door is $270. The variable cost of a window is $72.50 and of a door is $185.00. Fixed costs are $275,000.
(1) Determine the selling price per composite unit. (Omit the "$" sign in your response.)
Selling price per composite unit? $
(2)
Determine the variable costs per composite unit (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Variable costs per composite unit? $
(3) Determine the break-even point in composite units. (Round your intermediate calculation to 2 decimal places.)
Break-even point in composite units? composite units
(4) Determine the number of units of each product that will be sold at the break-even point. (Round your intermediate calculation to 2 decimal places.)
Unit sales of windows at break-even point? units
Unit sales of doors at break-even point? units
Explanation / Answer
1) selling price per composite unit = 120x8 + 270x2 = 1500 2) the variable costs per composite unit = 72.50x8 + 185.00x2 = 950 3) Break-even point in composite units - cost = revenue 275000 + 72.50 (8x) + 185 (2x) = 120(8x) + 270(2x) x = 500 composite units 4)windows = 8x = 4000 dorrs = 2x = 1000
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