Problem:
Perrson Company makes two types of backpacks. Data for the company's activity during a typical month are presented below:
School Hiker
Model Model
Sales units 40,000 40,000
Selling price per unit $6 $18
Variable expense per unit $2 $10
The company's total fixed expenses are $80,000. There are no beginning or ending inventories.
Required:
a. What is the per unit contribution margin for each of the two models?
b. What is the break-even point in terms of sales dollars if the sales mix remains constant?