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mits07
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| Posted: 11 Feb 2010 at 12:54 | IP Logged
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Thomas sells product X, Y and Z. Thomas sells 3 units of X for each unit of Z, and 2 units of Y for each unit of X. The Contribution Margin are $1.00 per unit of X, $1.50 per unit of Y, and $3.00 per unit of Z. Fixed Costs are $600,000. How many units of X would Thomas sell at the breakeven point?
Answer: 120,000
I don't understand how they got 6 units for Y?????? Can anyone help?
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HFAnderson
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| Posted: 11 Feb 2010 at 15:09 | IP Logged
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Since he sells 3 units of X, and 2 units of Y for each unit of Unit of X you just multiply it out. 3*2=6.
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mits07
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| Posted: 11 Feb 2010 at 15:15 | IP Logged
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hmmm ok. Thx.
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EAK5455
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| Posted: 11 Feb 2010 at 22:35 | IP Logged
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The first step is computing the composite contribution margin. Consider the following:
3 units of X = 1 unit of Z
2 units of Y = 1 unit of X
Using these relationships, you can make the following realization:
2 units of Y are sold for every 1 unit of X, therefore 6 units of Y are sold for every 1 unit of Z
Now we can compute the following composite contribution margin:
Z: $3.00 x 1 unit = $3.00
Y: $1.50 x 6 units = $9.00
X: $1.00 x 3 units = $3.00
Total composite contribution margin = $15.00
Once you know the composite contribution margin, simply divide the fixed costs by the CM and you will have the breakeven
composite units:
$600,000 / $15 = 40,000 composite units
Now multiply the number of composite units, which has a basis in Z units, by the relationship between X and Z:
40,000 * 3 = $120,000
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Topic: Product Mix - breakeven Question
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