Compute break-even unit for each product
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
In the next month, the company want to launch new product, a night cream. The selling price for Night Cream is $15 and variable cost per unit to produce is $5. The total fixed cost to produce night cream is $525,000. The sales mix between face wash and night cream is 2:1. Compute break-even unit for each product
Expert Solution
Step 1
First we need to calculate the contribution margin of the individual product then we will calculate the weighted contribution margin for the sales mix to calculate the BEP.
Formula:
Contribution margin per unit = Sales price per unit - Variable cost per unit
Weighted average contribution margin = Contribution margin per unit * Sales mix percentage
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