Answer:
Selling price: $5,820
Variable cost: $3,320
BEP= 125 units (500 desks and 250 chairs)
Step-by-step explanation:
We need to calculate the break even point.
In this case, we have composite unit made by two products wich have a ratio of 4:2. Thar means 4 desks and 2 chairs per unit.
The selling price of this composite unit is:
[tex]P=4*P_d+2*P_c=4*1220+2*470=5820[/tex]
The variable cost of the composite unit is:
[tex]VC=4*VC_d+2*VC_c=4*720+2*220=3320[/tex]
To calculate the break even point, the unit will be the composite one (4 desks and 2 chairs).
We know the fixed costs ($312,500) and the selling price and variable costs of each composite unit, so we are ready to calculate the BEP.
The BEP formula states that
[tex]BEP=\frac{FC}{p-vc}=\frac{312500}{5820-3320}=\frac{312500}{2500}=125[/tex]
That means that the quantity needed to sell to start to have profits is 125 composite units.
That means 500 desks (125*4=500) and 250 chairs (125*2=250).