[rsiddiqui]

A company produces and sells two products. The first product accounts for 75% of sales and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the break-even point, what number of units of the first product will have been sold?

They start the answer key with this: (First product CM X 75% of total units) + (Second product CM X 25% of total units) = Fixed costs

Whats the general equation because i’ve never seen this

[monikernc]

That is the equation for determining the breakeven point. It sets the proceeds of the weighted contribution margins times sales quantity equal to fixed costs. It is a variation of Income = SP(x)- VC(x) – fixed costs. When income equals zero and you substitute CM for SP – VC, it becomes CM(x)=fixed costs. Because there are two products you have to modify it for the sales mix to get the equation that you provided from the solution above to solve for x.

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[rsiddiqui]

how do you know income=0

[lswang]

Because it's the breakeven point. Breakeven = you don't lose any money and you don't make any income.

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