Lamar & Co., makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows: Plain Fancy
Unit selling price $ 25.00 $ 36.00
Variable cost per unit 13.00 20.00
Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
Assuming that the sales mix remains constant, compute the total number of units of each product that the company must sell to break even.
Show all computations.

Results are below.

Explanation:

First, we will calculate the weighted average contribution margin:

Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)

Weighted average contribution margin= (0.6*25 + 0.4*36) - (0.6*13 + 20*0.4)

Weighted average contribution margin= $13.6

Now, the break-even point for the whole company:

Break-even point (units)= Total fixed costs / Weighted average contribution margin

Break-even point (units)= 45,000 / 13.6

Break-even point (units)= 3,309

Now, for each product line:

Plain= 0.6*3,309= 1,985

Fancy= 0.4*3,309= 1,324

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