Question

Gibson Company manufactures two products. The budgeted per-unit contribution margin for each product follows: Sales price Variable cost per unit Contribution margin per unit Super $ 99 (66) $ 33 Supreme $131 (91) $ 40 Gibson expects to incur annual fixed costs of $139,620. The relative sales mix of the products is 60 percent for Super and 40 percent for Supreme Required a. Determine the total number of products (units of Super and Supreme combined) Gibson must sell to break even. b. How many units each of Super and Supreme must Gibson sell to break even? (For all requirements, do not round intermediate calculations.) units a Total number of products b. Product Super Product Supreme units units

Answer 1

a)

	Product Super	Product supreme	Total
selling price per unit	99	131
variable cost per unit	-66	-91
contribution margin per unit	33	40
sales mix	60%	40%
Weighted average contribution margin per unit	19.8	16	35.8

Weighted average contribution margin per unit = $35.8

Number of units at break even = Total fixed cost/ Weighted average contribution margin per unit

= 139,620/35.8

= 3,900 units

b)

Break even quantity of product Super = Number of units at break even x Sales mix proportion of product Super

= 3,900 x 60%

= 2,340 units

Break even quantity of product Supreme = Number of units at break even x Sales mix proportion of product Supreme

= 3,900 x 40%

= 1,560 units

a	Total number of products	3,900	Units
b	Product super	2,340	units
	Product supreme	1,560	units