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The Terrence Co. manufactures two products, Baubles and Trinkets. The following are projections for the coming...

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Accounting

The Terrence Co. manufactures two products, Baubles andTrinkets. The following are projections for the coming year:

BaublesTrinkets
15,000 units7,500 units
Sales$15,000$15,000
Costs:
Fixed$3,300$9,570
Variable6,75010,0503,75013,320
Income before taxes$4,950$1,680


How many Baubles will be sold at the break-even point, assumingthat the facilities are jointly used with the sales mix remainingconstant?

Answer & Explanation Solved by verified expert
4.0 Ratings (419 Votes)

Particulars Baubles Trinkets
Sale price per unit (15000/15000) (15000/7500)
Sale price per unit 1 2
Variable Cost per unit (6750/15000) (3750/7500)
Variable Cost per unit 0.45 0.5
Ratio of Sales                15,000 : 7500
Ratio of Sales                           2 : 1
Let the break even sales quantity for trinkets be 'X'
Therefore, break even sales quantity for baubles be '2X'
Fixed Cost = (3300+9570)
Fixed Cost = 12870
Fixed Cost/(Sales - Variable Cost) = 1
12870/((2X*1+X*2)-(2X*.45+X*.5)) = 1
12870/(4X-1.4X) = 1
12870/2.6X = 1
X = 4950
Baubles Trinkets
Break even sales quantity 2X X
Break even sales quantity to be sold 9900 4950
Checking for Answer
Sales 9900 9900
Variable Cost 4455 2475
Contribution 5445 7425
Fixed Cost 3300 9570
Profit/Loss 2145 -2145
Total Profit = 0

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