Riku Company manufactures two products. The budgeted per-unit contribution margin for each product follows:

Riku Company manufactures two products. The budgeted per-unit contribution margin for each product follows:
 

	Super				Supreme
Sales price	$	68			$	94
Variable cost per unit		(38	)			(44	)
Contribution margin per unit	$	30			$	50

Riku expects to incur annual fixed costs of $540,000. The relative sales mix of the products is 70 percent for Super and 30 percent for Supreme.

Required

1. Determine the total number of products (units of Super and Supreme combined) Riku must sell to break even.
2. How many units each of Super and Supreme must Riku sell to break even?

Explanation

a.

Weighted-average contribution margin per unit:

Product Super $30 × 0.70	$	21
Product Supreme $50 × 0.30		15
Weighted-average contribution margin per unit	$	36

Break-even = Fixed cost ÷ Weighted-average contribution margin/Unit
= $540,000 ÷ $36 = 15,000 units

b.
Product Super = 15,000 units × 0.70 = 10,500 units
Product Supreme = 15,000 units × 0.30 = 4,500 units

Thanks