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The weighted average contribution margin is $36 per unit and fixed costs are $25,200 a month. Hair dryers are 60% of the sales mix. How many hair dryers must be sold to break even?
A700 hair dryers
B280 hair dryers
C420 hair dryers
D360 hair dryers
Answer & Solution
Correct answer: C. 420 hair dryers
1. Total breakeven units are fixed costs divided by the weighted average contribution margin.
2. $25,200 divided by $36 gives 700 units per month in total.
3. The sales mix then splits those 700 units between the two products.
4. Hair dryers are 60% of 700, which is 420 units.
5. Curling irons take the other 40%, which is 280 units.
6. A proof: 420 times $40 plus 280 times $30 gives $16,800 plus $8,400, which is the $25,200 of fixed costs.
7. 700 is the combined figure, so answering with it forgets to apply the mix.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 5.3.4 Breakeven Point with Sales Mix_
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