Hi,

If you check that equation, it is similar to WACMR. You can use CM per unit to calculate break even units or CM ratio to calculate break even dollars.

(.75*2 + .25*1 = 1.75)

280,000/1.75 = 160,000 units

160,000* .25 = 40,000 (B's share)

40,000*6 = 240,000 (B's break even sales)

Hope this helps

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Fuhadh Saneen Seethi Marakkarakam

Supervisor

MUSCAT

Oman

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Original Message:

Sent: 05-15-2024 10:24 AM

From: Bhumika Kaushik

Subject: multi product breakeven point question (part 2)

**DOUBT- ***Why didn't they solve by taking WACMR into consideration in denominator and also what is composite units?*

A company with $280,000 of fixed costs has the following data:

Product A Product B

Sales price per unit $5 $6

Variable costs per unit $3 $5

Assume three units of A are sold for each unit of B sold. How much will sales be in dollars of product B at the breakeven point?

A. $840,000

B. $240,000

C. $280,000

D. $200,000

SOLUTION- The breakeven point equals fixed costs divided by unit contribution margin. The composite unit contribution margin for A and B is $7 {[3 units of A × ($5 – $3)] + [1 unit of B × ($6 – $5)]}. Thus, 40,000 composite units ($280,000 ÷ $7), including 40,000 units of B, are sold at the breakeven point. Hence, sales of B at the breakeven point equal $240,000 (40,000 units × $6).