Chelonia Ltd manufactures small robot toys. It plans to introduce two products, Speedie and Spunkie. It is anticipated that the product mix will be 40% Speedie and 60% Spunkie. One unit of Speedie will be sold for $100, with variable cost equals $40. For a unit of Spunkie, the selling price will be $120 and the variable cost is $70. The fixed cost for producing the two products is $108 000. What is the break even point?

A) Speedie: 1200 units; Spunkie: 800 units
B) Speedie: 800 units, Spunkie: 1200 units
C) Speedie: 1800 units; Spunkie: 2160 units
D) Speedie: 2160 units, Spunkie: 1800 units

Question

Andrea Tamindzija · Accepted Answer

Final Answer : B, Explanation :  First, let's calculate the contribution margin per unit for each product:- Speedie: $100 - $40 = $60- Spunkie: $120 - $70 = $50Next, we can calculate the weighted average contribution margin per unit:(0.4 x $60) + (0.6 x $50) = $54To calculate the break even point, we can use the formula:Break even point (in units) = Fixed costs ÷ Weighted average contribution margin per unitPlugging in the numbers, we get:Break even point (in units) = $108,000 ÷ $54 = 2,000 unitsSince we know the product mix is 40% Speedie and 60% Spunkie, we can calculate the number of units needed for each product:- Speedie: 40% x 2,000 = 800 units- Spunkie: 60% x 2,000 = 1,200 unitsTherefore, the answer is B.

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