Crown Co. can produce two types of lamps, the Enlightner and Foglighter. The data on the two lamp models are as follows: Enlightner Foglighter Sales volume in units 500 400 Unit sales price $ 300 $ 400 Unit variable cost 200 240 Unit contribution margin $ 100 $ 160 It takes one machine hour to produce each product. Total fixed costs for the manufacture of both products are $90,000. Demand is high enough for either product to keep the plant operating at maximum capacity. Assuming that sales mix in terms of units remains constant, what is the breakeven point in total units

Crown Co.

The breakeven point in total units is:

711 units

Explanation:

a) Data and Calculations:

                                            Enlightner   Foglighter   Total

Sales volume in units           500              400       900

Unit sales price                   $ 300           $ 400

Sales value                      $150,000    $160,000    $310,000

Unit variable cost                  200              240

Variable costs                 $100,000     $96,000    $196,000

Unit contribution margin    $ 100            $ 160

Total contribution            $50,000     $64,000     $114,000

Machine hour                          1                  1  

Weighted contribution margin per unit                $126.67 ($114,000/900)

Total fixed costs                                                     $90,000

Variable costs                                                       $196,000

Total costs =                                                         $286,000

Weighted contribution margin per unit:

                                           Enlightner          Foglighter      Total

Unit contribution margin     ($ 100 *5/9)   ($ 160 * 4/9)

                                               $55.56             $71.11         $126.67

Break-even point in total units = Fixed costs/Weighted contribution margin per unit

= $90,000/$126.67

= 710.5 units

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