Mccoy brothers manufactures and sells two products, a and z in the ratio of 4: 2. product a sells for $75; z sells for $95. variable costs for product a are $35; for z $40. fixed costs are $418,500. compute the number of units of product z mccoy must sell to break even.

1,350.

6,200.

10,463.

1,550.

6,750.

The correct answer is none of the answer is correct as it is 3,100 units

Explanation:

Contribution margin = (Selling price per unit of product A - Variable cost per unit of product A) ×  Sales Mix + (Selling price per unit of product Z - Variable cost per unit of product Z) ×  Sales Mix

= ($75 - $35) ×  4 + ($95 - $40) × 2

= $40 ×  4 + $55 ×  2

= $160 + $110

= $270

Compute break even sales as:

Break even sales = Fixed Cost / Contribution margin

$418,500 / $270

= 1,550 units

Computation of the number of units must be sell to break even:

Break even sales of product Z = Sales mix of product Z × Break even sales in total

= 2  ×  1,550 units

= 3,100 units

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