A company sells two products in a fixed mix of 3 units of A to 1 unit of B. Contribution is £8 per unit of A and £20 per unit of B. Fixed costs are £88,000. How many units of B are sold at break-even?
Answer and explanation
Correct answer: C. 2,000 units
- Step 1: One mix unit of 3A + 1B earns 3 × £8 + £20 = £44 contribution.
- Step 2: Break-even mixes = £88,000 ÷ £44 = 2,000 mixes.
- Step 3: So B = 2,000 × 1 = 2,000 units (and A = 6,000 units).
Answer
2,000 units.
Why not the others: 4,400 units: This divides fixed costs by the contribution on B alone (£88,000 ÷ £20). 6,000 units: This is the break-even units of A and not of B. 11,000 units: This divides total fixed cost by the contribution of A (£88,000 ÷ £8).
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