In the next month, the company want to launch new product, a night cream. The selling price for Night Cream is $15 and variable cost per unit to produce is $5. The total fixed cost to produce night cream is $525,000. The sales mix between face wash and night cream is 2:1. Compute break-even unit for each product Youthinc manufactures and sells a face wash just about one year ago. The monthly income statementfor June 2021 is as follow: (based on 250,000 unit sold)RevenueVariable Costs:ManufacturingMarketingTotal Variable CostContribution MarginFixed Costs:ManufacturingMarketingTotal Fixed Cost$2,250,000$750,000105,000$855,000$1,395,000$200,000$260,000$460,000$935,000Operating Income

Answered: Compute break-even unit for each…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

In the next month, the company want to launch new product, a night cream. The selling price for Night Cream is $15 and variable cost per unit to produce is $5. The total fixed cost to produce night cream is $525,000. The sales mix between face wash and night cream is 2:1. Compute break-even unit for each product

Youthinc manufactures and sells a face wash just about one year ago. The monthly income statement
for June 2021 is as follow: (based on 250,000 unit sold)
Revenue
Variable Costs:
Manufacturing
Marketing
Total Variable Cost
Contribution Margin
Fixed Costs:
Manufacturing
Marketing
Total Fixed Cost
$2,250,000
$750,000
105,000
$855,000
$1,395,000
$200,000
$260,000
$460,000
$935,000
Operating Income

Expert Solution

Step 1

First we need to calculate the contribution margin of the individual product then we will calculate the weighted contribution margin for the sales mix to calculate the BEP.

Formula:

Contribution margin per unit = Sales price per unit - Variable cost per unit

Weighted average contribution margin = Contribution margin per unit * Sales mix percentage