Birch Manufacturers has provided the following information regarding the two products that it sells: Jet Boats Ski Boats Sales price per unit $ 8 comma 000 $ 24 comma 000 Variable cost per unit $ 6 comma 000 $ 16 comma 000 Annual fixed costs are $ 300 comma 000. How many units must be sold in order for Birch to break even, assuming that Birch sells five jet boats for every two ski boats sold? (Round any intermediate calculations to two decimal places, and your final answer to the nearest unit.) A. 58 jet boats and 23 ski boats B. 12 jet boats and 7 ski boats C. 23 jet boats and 58 ski boats D. 7 jet boats and 12 ski boats

A. 58 jet boats and 23 ski boats

Explanation:

Break even point is the level of activity at which a firm neither makes a profit nor a loss.

First determine the sales mix :

Note : Birch sells five jet boats for every two ski boats sold

thus the mix is 5:2

Then calculate the contribution per batch

Jet Boats = $8,000 - $6,000 =$2,000

Ski Boats = $24,000 - $ 16,000 = $8,000

Total Contribution per batch = ((5×$2,000) + (2 ×$8,000))

                                               = $ 26,000

Calculate the batch contribution

Break - even Point = Fixed Cost / Contribution per batch

                             = $300,000 /  ((5×$2,000) + (2 ×$8,000))

                             = $300,000 / $ 26,000

                             = 11.54

Use the sales mix to determine the units to break even in the batch

Jet Boats = 11.54 × 5

                = 57,7

                = 58

Ski Boats = 11.54 × 2

                = 23,08

                = 23

Thus the units sold to break even would be : 58 jet boats and 23 ski boats

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