Data for the next 2 questions Tamara Company sells two types

Data for the next 2 questions:

Tamara Company sells two types of control systems – Basic and Deluxe - as follows:

Selling price per unit Variable expense per unit

Basic $120 $90

Deluxe $280 $220

Fixed monthly expenses total $300,000. The expected sales mix in units is 60% for product Basic and 40% for Deluxe.

1. How many units of each product must be sold each month in order to breakeven?

2. How many units of each product must be sold each month in order to make $150,000 profit per month?

Solution

Basic Deluxe Selling price per unit 120 280 variable expense per unit 90 220 contribution margin per unit 30 60 Weighted average contribution = 30*.6+60*.4 42 1) units to be sold to breakeven = fixed cost/weighted average contribution 300,000/42          7,143 product A (7143*60%)          4,286 product B (7143*40%)    2,857.14 2) (300,000+150,000)/42          10,714 product A          6,428 product B          4,286