Dubashi Windows manufactures two standard size windows, J and R, in the ratio of 5:3. J has a selling price of $150 per unit and R has a selling price of $200 per unit. The variable cost of J is $75.00 and the variable cost of R is $90.00. Fixed costs are $352,500. Compute the (a) contribution margin per composite unit, (b) break-even point in composite units, (c) number of units of each product that will be sold at the break-even point.
What will be an ideal response?
(a)
Selling price of a composite unit
| 5 units of J @ $150 per unit | $750 |
| 3 units of R @ $200 per unit | 600 |
| Selling price of a composite unit | $1,350 |
| 5 units of J @ $75 per unit | $375 |
| 3 units of R @ $90 per unit | 270 |
| Variable costs of a composite unit | $645 |
| Contribution margin per composite unit | $705 |
Break-even point in composite units = $144,000 / $60 = 2,400 composite units
(b) $352,500 / $705 = 500 composite units to break-even
(c) 500 composite units = 2,500 units of product J (500 x 5) and 1,500 units of product R (500 x 3)
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