Question

Business Solutions sell upscale modular desk units and office chairs in the ratio of 3:2 (desk unit:chair). The Selling prices are $1,250 per desk unit and $500 per chair. The variable costs are $750 per desk and $250 per chair. Fixed costs are $120,000.

1. Compute the selling price per composite unit.

2. Compute the variable costs per composite unit.

3. Compute the break-even point in composite units.

4. Compute the number of units of each product that would be sold at the break-even point.

Answer 1

$ 4,750 1 The selling price per composite unit = Calculation Total Desk $ 1,250 Chair 500 $ Selling Price per unit Ratio Total $ 3,750 $ 1,000 $4,750 $ 2,750 2 The variable costs per composite unit = Calculation Variable cost per unit Ratio Total Desk Chair Total $ 750 $ 250 12 $ 2,250 $ 500 $ 2,750 3 The break-even point in composite units. = Calculation Break even unit = Fixed cost/Contribution per Composite unit Fixed Cost = 120,000 Selling price per Composite unit Variable cost per Composite unit Contribution Per unit Total $ 4,750 $ 2,750 $ 2,000 Break even unit = 120,000/2,000 60

4 Number of units of each product that would be sold at the break-even point. Desks Chairs Units Sales 180 Units 120 Units Calculation Desks = Chairs 60 x3 = 60 x 2 = 180 120 Please comment if you have any doubt Please give feedback