The following information is for Alex Corp: Product X: Revenue $15.00 Variable Cost $2.50 Product Y: Revenue $25.00 Variable Cost $10.00 Total fixed costs $50,000 What is the breakeven point assuming the sales mix consists of two units of Product X and one unit of Product Y

The break even point in units is 3750 units.

Explanation:

The composite break even point is the break even point in units calculated for a business having more than 1 product. The composite break even point is calculated by dividing the fixed costs by the weighted average contribution per unit.

Break even point in units = Fixed cost / Weighted average contribution per unit

The weighted average contribution per unit can be calculated using the following formula:

Weighted average CM per unit = (Weight of Product X in sales mix * Contribution per unit of Product X)  +  (Weight of Product Y in sales mix * Contribution per unit of Product Y)

Total units in sales mix = 2 of X + 1 of Y = 3

Contribution margin per unit = Selling price per unit - Variable cost per unit

Weighted average contribution per unit = [ 2/3 * (15 - 2.5)  +  1/3 * (25 - 10)]

Weighted average contribution per unit =  $13.33333333 per unit

Break even point in units = 50000 / 13.33333333

Break even point in units = 3750 Units

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