ExpertHard2 marksMultiple Choice
ACCA · Question 7 · Decision-making techniques
Section A
CodeCraft sells two software products: Basic and Pro.
The sales mix is 3 units of Basic for every 1 unit of Pro.
Basic: Selling price $50, Variable cost $20.
Pro: Selling price $120, Variable cost $40.
Total fixed costs are $85,000.
What is the break-even revenue for the company? (Round to the nearest whole dollar)
Section A
CodeCraft sells two software products: Basic and Pro.
The sales mix is 3 units of Basic for every 1 unit of Pro.
Basic: Selling price $50, Variable cost $20.
Pro: Selling price $120, Variable cost $40.
Total fixed costs are $85,000.
What is the break-even revenue for the company? (Round to the nearest whole dollar)
Answer options:
A.
$85,000
B.
$146,625
C.
$170,000
D.
$125,500
How to approach this question
1. Calculate contribution per unit for both. 2. Calculate revenue per mix (3 Basic + 1 Pro). 3. Calculate contribution per mix. 4. Find weighted average C/S ratio. 5. Divide Fixed Costs by C/S ratio.
Full Answer
B.$146,625✓ Correct
.
Common mistakes
Averaging the C/S ratios of the two products directly without weighting them by sales volume.
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