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Wide Open Industries Inc. has fixed costs of $475,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company’s two products follow:Product Selling Price Variable Cost per Unit Contribution Margin per UnitAA $145 $105 $40BB 110 75 35The sales mix for products AA and BB is 60% and 40%, respectively. Determine the break-even point in units of AA and BB. Round your interim computations to nearest cent, if required.a. Product AA unitsb. Product BB units

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Answer:

Break-even point (units)= 475,000/ (131 - 93)= 12,500 units

AA= 12,500*0.6= 7,500

BB= 12,500*0.4= 5,000

Explanation:

Giving the following information:

Wide Open Industries Inc. has fixed costs of $475,000.

AA

Selling Price= $145

Variable Cost= $105

Contribution Margin per Unit= $40

BB

Selling Price= 110

Variable Cost= 75

Contribution Margin per Unit= 35

The sales mix for products AA and BB is 60% and 40%, respectively.

Break-even point (units)= Total fixed costs / (weighted average selling price - weighted average variable expense)

weighted average selling price= 145*0.6 + 110*0.4= 131

weighted average variable expense= 105*0.6 + 75*0.4= 93

Break-even point (units)= 475,000/ (131 - 93)= 12,500 units

AA= 12,500*0.6= 7,500

BB= 12,500*0.4= 5,000

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