Question

Rundle Company manufactures two products. The budgeted per-unit contribution margin for each product follows: Super Supreme Sales price $ 100 $ 127 Variable cost per unit (67 ) (90 ) Contribution margin per unit $ 33 $ 37 Rundle expects to incur annual fixed costs of $175,760. The relative sales mix of the products is 80 percent for Super and 20 percent for Supreme. Required Determine the total number of products (units of Super and Supreme combined) Rundle must sell to break even. How many units each of Super and Supreme must Rundle sell to break even? (For all requirements, do not round intermediate calculations.)

Answer 1

Answer:

(a) 5,200 Units

(b) 4,160 Units ; 1,040 Units

Explanation:

Super:

Weighted Contribution Margin Per Unit:

= Contribution margin per unit × Sales Mix

= $33 × 80%

= $26.4

Supreme:

Weighted Contribution Margin Per Unit:

= Contribution margin per unit × Sales Mix

= $37 × 20%

= $7.4

Therefore,

Total Weighted Contribution Margin Per Unit = $26.4 + $7.4

                                                                           = $33.8

a. Total Units to Break Even:

= Fixed Cost ÷ Total Weighted Contribution Margin Per Unit

= $175,760 ÷ $33.8

= 5,200 Units

b. Hence,

Units of Product Super = 5,200 Units  × 80%

                                       = 4,160 Units

Units of Product Supreme = 5,200 Units × 20%

                                             = 1,040 Units