Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $36 and a selling price of $60. Q-Chip Plus has variable costs per unit of $42 and a selling price of $78. Ramirez\'s fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point?
a) 5063
b)5869
c) 9000
d) 11813
Solution
Answer is closet to (a) 5063 units
Formulas and Calculation Procedure
Following information is related to sales mix of product Q, and Q plus.
Product
Q
Q plus
Sales Price per Unit
$60
$78
Variable Cost per Unit
$36
$42
Sales Mix Percentage
30%
70%
Total Fixed Cost
$540,000
Calculate the break-even point in units.
Calculation
Step 1 : Calculate the contribution margin per unit for each product:
Product
Q
Q.plus
Sales Price per Unit
$60
$78
? Variable Cost per Unit
$36
$42
Contribution Margin per Unit
$24
$36
Step 2 : Calculate the weighted-average contribution margin per unit for the sales mix using the following formula:
Product A CM per Unit
.
Ramirez Corporation sells two types of computer chips- The sales mix i.docx
1. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70%
(Q-Chip Plus). Q-Chip has variable costs per unit of $36 and a selling price of $60. Q-Chip Plus
has variable costs per unit of $42 and a selling price of $78. Ramirez's fixed costs are $540,000.
How many units of Q-Chip would be sold at the break-even point?
a) 5063
b)5869
c) 9000
d) 11813
Solution
Answer is closet to (a) 5063 units
Formulas and Calculation Procedure
Following information is related to sales mix of product Q, and Q plus.
Product
Q
Q plus
Sales Price per Unit
$60
$78
Variable Cost per Unit
$36
2. $42
Sales Mix Percentage
30%
70%
Total Fixed Cost
$540,000
Calculate the break-even point in units.
Calculation
Step 1 : Calculate the contribution margin per unit for each product:
Product
Q
Q.plus
Sales Price per Unit
$60
$78
? Variable Cost per Unit
$36
$42
Contribution Margin per Unit
$24
$36
Step 2 : Calculate the weighted-average contribution margin per unit for the sales mix using the
following formula:
Product A CM per Unit
3. Product Q Q plus
Sales Price per Unit $60 $78
Variable Cost per Unit $36 $42
Sales Mix Percentage 30% 70%
Total Fixed Cost $540,000
