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the fixed cost for product

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Product A:
Selling Price $10
Variable Costs $5
Fixed Costs $2000

Product B:
Selling Price $12
Variable Costs $10.00
Fixed Costs $6

Q.
[a] If these products are sold in the ratio of 4a to 3b, what is break even point?
what about 5a to 5b? In order to maximize profit, which product mix should be pushed?

[b] Assume that product A requireds .5 hour per unit and B requires .25 hour per unit. If both products must go through the same manufacturing machine and there are only 30000 machine hours available per period, which product should be pushed?

A. A=400 units and B=300 units
Aii. A=372 units, B=?
Aiii. A=$5, B=$5
B. Product A

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Solution Summary

Determine the fixed cost for product

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Note: Check the question the fixed cost for product B should be $600
A(i)
Calculate contribution margin
=Selling price - variable cost
for each product.

Product A = $10-$5=$5 per unit
Product B = $12-$10=$2 per unit

If products are sold in ratio of 4a to 3b, the contribution margin per unit will be weighted average
$5*4/7+$2*3/7=$26/7

Break even point ...

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