Question

US-Mobile manufactures and sells two products, tablet computers and smartphones, in the ratio of 5:3. Fixed costs are \(105,000, and the contribution margin per composite unit is \)125. What number of each type of product is sold at the break-even point?

Short answer

Tablet computers: 525 units

Smartphones: 315 units

Step-by-step solution

Definition of Break-Even Units

The number of units that a business entity must sell to achieve the situation of no-profit, no-loss is known as break-even units. It is calculated using the fixed cost and the contribution margin per unit.

Calculation of break-even point of each product

$\begin{array}{rcl}\mathrm{Break}-\mathrm{even}\mathrm{point}& =& \frac{\mathrm{Fixed}\mathrm{cost}}{\mathrm{Contribution}\mathrm{margin}\mathrm{per}\mathrm{unit}}\\ & =& \frac{\$105,000}{\$125}\\ & =& 840\mathrm{units}\end{array}$

Product	Share in ratio	/	Total of ratio	X	Total break-even units	=	Break-even units
Tablet computers	5	/	8	X	840	=	525
Smartphones	3	/	8	X	840	=	315