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    Breakeven - Multi-products

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    Boise Company manufactures and sells three products: Good, Better, and Best. Annual fixed costs are $3,315,000, and data about the three products follow.

    Good Better Best
    Sales mix in units 30% 50% 20%
    Selling price $250 $350 $500
    Variable cost 100 150 250

    A. Determine the weighted-average unit contribution margin.
    B. Determine the break-even volume in units for each product.
    C. Determine the total number of units that must be sold to obtain a profit for the company of $234,000.
    D. Assume that the sales mix for Good, Better, and Best is changed to 50%, 30%, and 20%, respectively. Will the number of units required to break-even increase or decrease?

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    Solution Preview

    A. Determine the weighted-average unit contribution margin.

    In weighted average contribution margin we calculate the contribution margin for each product and then multiply by the weight to get the weighted contribution margin. We then add all these weighted contribution margins to get the weighted average contribution margin
    Good - Contribution margin = 250-100=150
    Better = ...

    Solution Summary

    The solution explains the breakeven calculations when there are three products.