thank you! Gabe Industries sells two products, Basic models and Deluxe models. B
ID: 2402133 • Letter: T
Question
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Gabe Industries sells two products, Basic models and Deluxe models. Basic models sell for $39 per unit with variable costs of $20 per unit. Deluxe models sell for $45 per unit with variable costs of 545 per unit. Total fixed costs for the company are $983. Gabe Industries typicaly sells three Basic models for every Deluxe model. What is the breakeven point for Basic models and Deluxe models? (Round any intermediary calculations to the nearest cent and your final answers to the nearest whole unit) ? A. 17 units of Basic, 52 units of Deluxe B. 32 units of Basic; 39 units of Deluxe O C. 39 units of Basic, 32 units of Deluxe O D. 52 units of Basic, 17 units of DeluxeExplanation / Answer
Solution:
The question is related to the Break Even Point in Sales Mix.
We need to first calculate the sales mix ratio.
Sales Mix Ratio
3 basic model for each Deluxe Model. It means out of total 4 model, 3 are basic and 1 is Deluxe.
Basic Model = 3 / 4 = 75%
Deluxe Model = ¼ = 25%
Basic
Deluxe
Unit Selling Price
$39
$45
Less: Variable Cost
$20
$45
Contribution Margin Per Unit
$19
$0
x Sales Mix Ratio
75%
25%
$14.25
$0.00
Weighted Average CM per unit
$14.25
($14.25 + 0)
Total Fixed Costs
$983
Weighted Average Break Even Point for Company in Units (Fixed Cost / Wg Avg CM per Unit)
69
Break Even Point in Units for Whole Company = 69 Units
Break Even Point for Basic Model in Unit = 69 Units x Sales Mix Ratio 75% = 52 Units
Break Even Point for Deluxe Model in Unit = 69 Units x Sales Mix Ratio 25% = 17 Units
Hence, the correct option is D. 52 Units of Basic, 17 Units of Deluxe
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Basic
Deluxe
Unit Selling Price
$39
$45
Less: Variable Cost
$20
$45
Contribution Margin Per Unit
$19
$0
x Sales Mix Ratio
75%
25%
$14.25
$0.00
Weighted Average CM per unit
$14.25
($14.25 + 0)
Total Fixed Costs
$983
Weighted Average Break Even Point for Company in Units (Fixed Cost / Wg Avg CM per Unit)
69
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