US CMA Part 2 · Chapter 5 · Question 6 of 15
Redwood Garden sells two products in a constant sales mix of 3 units of X for every 2 units of Y. X has a contribution margin of $20 per unit and Y has $35 per unit. Fixed costs are $520,000. How many units of X must be sold to break even?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 12,000 units
Explanation
CM per sales-mix batch (3X + 2Y) = (3 x $20) + (2 x $35) = $60 + $70 = $130. Breakeven batches = $520,000 / $130 = 4,000. Units of X = 4,000 x 3 = 12,000; units of Y = 4,000 x 2 = 8,000. A simple average CM of $27.50 ignores the sales mix.
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