A company sells two models of a product—basic and premium. The basic model has a variable cost of $75 and sells for $100. The premium model has a variable cost of $100 and sells for $150. Fixed costs are $15,000. If the company usually sells 5,000 basic models and 2,500 premium models, then the break-even point in composite units is units.

What are the steps?

BEP MIX = 450

Explanation:

Where:

The contribution represent the value of the sale after deducting the cost to generate the sale:

Item A

100 - 75 = 25 dollars

Item B

150 - 100 = 50 dollars

The unit sales ratio is 5,000:2,500 which is 2:1

Thus:

25 x 2/3

+ 50 x 1/3

contribution of the mix:

33.33333333

Now we return to the break even point formula:

BEP = 450

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