Compute break-even unit for each product

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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

Youthinc manufactures and sells a face wash just about one year ago. The monthly income statement
for June 2021 is as follow: (based on 250,000 unit sold)
Revenue
Variable Costs:
Manufacturing
Marketing
Total Variable Cost
Contribution Margin
Fixed Costs:
Manufacturing
Marketing
Total Fixed Cost
$2,250,000
$750,000
105,000
$855,000
$1,395,000
$200,000
$260,000
$460,000
$935,000
Operating Income
Transcribed Image Text:Youthinc manufactures and sells a face wash just about one year ago. The monthly income statement for June 2021 is as follow: (based on 250,000 unit sold) Revenue Variable Costs: Manufacturing Marketing Total Variable Cost Contribution Margin Fixed Costs: Manufacturing Marketing Total Fixed Cost $2,250,000 $750,000 105,000 $855,000 $1,395,000 $200,000 $260,000 $460,000 $935,000 Operating Income
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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