Campbell Company manufactures two products. The budgeted per-unit contribution margin for each product follows:

Super Supreme
Sales price $108 $131
Variable cost per unit (59 ) (82)

Contribution margin per unit $49 Campbell expects to incur annual fixed costs of $254,800. 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) Campbell must sell to break even.
b. How many units each of Super and Supreme must Campbell sell to break even?

Instructions are listed below.

Explanation:

Giving the following information:

Super Supreme

Sales price $108 $131

Variable cost per unit (59 ) (82)

Campbell expects to incur annual fixed costs of $254,800. The relative sales mix of the products is 60 percent for Super and 40 percent for Supreme.

To calculate the break-even point in units, first, we need to calculate the weighted average selling price and weighted average variable cost:

weighted average selling price= 0.60*108 + 0.40*131= $117.2

weighted average variable cost= 0.60*59 + 0.40*82= $68.2

Now, we can calculate the break-even point:

break-even point (units)= fixed expense/ (weighted average selling price - weighted average variable cost)

break-even point (units)= 254,800/ (117.2 - 68.2)= 5,200 units

To calculate the number of each product we need to multiply the total break-even point for the participation of the sales:

Super= 5,200*0.6= 3,120 units

Supreme= 5,200*0.40= 2,080units

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