Court Inc. produces two types of products - Gizmos and Gadgets. The following information is available related to each product: Gizmos Gadgets Sales price per unit $80 $50 Variable costs per unit 36 22 Three-fourths of the products sold are Gizmos and one-fourth are Gadgets (3:1). If total fixed costs are $50,000, how many total units need to be sold in order for the company to break even?

1250

Explanation:

Let's go in stages,

Gizmos are sold for $80 and have a variable cost of $36. Subtracting that would give us $44. This is the Contribution margin of Gizmos.

Gadgets are sold for $50 and have a variable cost of $22. Subtracting that would give us $28. This is the Contribution margin of Gadgets.

The text says that 3/4 of goods sold are Gizmos with the rest being gadgets.

Let's account for that using their contribution margins.

This means that Gizmos contribute 3/4 from their CM which we'll calculate as,

= 3/4 * 44

= 33

Gadgets would be

= 1/4 * 28

= 7

The Weighted Average contribution margin for both goods in their selling proportion is therefore,

= 33 + 7

= $40

If they make $40 as the weighted average CM then to find the amount of units needed to break even with a fixed cost of $50,000 can be calculated by dividing the fixed costs by the Weighted Average CM which would be,

= 50,000/40

= 1250

They would need to sell 1250 total units in order to break even with a product mix of 3/4 Gizmos and 1/4 Gadgets.

Please do react or comment if you need any clarification. Thank you.

D. Business equipment can be continually adjusted based on analysis of data.

Explanation: Apex Learning - Computer Applications 5.4.3 Test (CST)

This was the answer given in the lesson, as well as during the quiz. (I am not giving sass, just hoping this answer doesn't get removed like all the other apex answers I have shared.)