Onita Industries has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Bonita are 70000 Standard and 30000 Supreme. Fixed expenses are $1500000. How many Standards would Bonita sell at the break-even point? 35000. 70000. 50000. 25000.

Units of Standard at break even point are 35000 units.

Explanation:

The break even point in units is the number of units where total revenue equals total cost and there is no profit or no loss. When we calculate the composite break even point, we use the weighted average contribution margin per unit that is contribution margin per product multiplied by its weightage in the sales mix.

Weightage in the sales mix = Sales of a Product / Total sales of all products

Total sales of all products for Bonita = 70000 + 30000 = 100000

The weightage of Standard in sales mix = 70000 / 100000 = 0.7 or 70%

Break even point in units = Fixed costs / weighted average contribution margin per unit

Break even in units = 1,500,000 / 30 = 50000 units

Out of the 50000 units needed to break even, the units of Standard will be,

50000 * 0.7 = 35000 units

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