Question

Question 4

Oriole Industries sells two electrical components with the following characteristics. Fixed costs for the company are $490,000 per year.

		XL-709		CD-918
Sales price		$33.00		$48.00
Variable cost		29.00		40.00
Sales volume		98,000 units		147,000 units

How many units of each product must Oriole Industries sell in order to break even?- ** this question I ran out of attempts for :(

Oriole’s vice president of sales has determined that due to market changes, the sales price of component XL-709 can be increased to $37.00 with no impact on sales volume. What will be Oriole’s new breakeven point in units??

Answer 1

XL - 709 CD - 918 30,625 45.938 Break even units Change in Selling Price XL - 709 CD - 918 New Break even units 24.500 36,750 Working Notes Sales Units mix ratio electrical components = 98000 : 147000 = 1 : 1.5 By using equation method XL-790 sold units assumed as X At break even point profit is Zero so Operating Income = Contribution margin of XL-709 + Contribution margin of CD-918 - Fixed Cost $0 = ($33-$29)X + (S48-540)1.5X - $490,000 S490,000 = $4X +12x 16X = $490,000 X = $490,000/16 = 30.625 XL-709 Break even units = 30.625 units CD-918 Break Even units = 30.625*1.5=45,938 units

New Selling Price = $37 Operating Income = Contribution margin of XL-709 + Contribution margin of CD-918 - Fixed Cost $0 = ($37-$29)X + (S48-540)1.5X - $490.000 $490.000 = $8X +12x 20X = $490,000 X = $490.000/20 = 24,500 XL-709 Break even units = 24,500 Units CD-918 Break Even units = 24,500*1.5 = 36,750 units