Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per un... Accounting MCQs | Accounting MCQs

Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change.
What is Catfur’s breakeven point in dollars?

$300,000$750,000$857,142$942,857Show Result

Correct - Your answer is correct.

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Detailed Answer

Answer (D) is correct. A helpful approach in a multiproduct situation is to make calculations based on the composite unit, i.e., 2 units of Product X and 3 units of Product Y (a 66% ratio). The selling price of this composite unit is $110 [(2 × $10) + (3 × $30)]. The UCM of the composite unit is $35 {[2 × ($10 – $6)] + [3 × ($30 – $21)]}. Consequently, the breakeven point in composite units is 8,571.43 ($300,000 FC ÷ $35 UCM), and the breakeven point in sales dollars is $942,857 (8,571.43 × $110).