Break-even Point Calculation for UP Forklifts

What is the breakeven point in total units for UP Forklifts?

Given that UP Forklifts sells large forklifts for $80,000 per unit with variable costs of $26,000 per unit, and small forklifts for $60,000 per unit with variable costs of $12,000 per unit. The company's total fixed costs are $4,455,000 and typically sells one large forklift for every three smalls.

Answer:

Break-even point (units) = 90 units

Explanation:

Considering the information provided:

- Large forklift:

Selling price = $80,000 per unit

Unitary variable cost = $26,000 per unit.

- Small forklifts:

Selling price = $60,000 per unit

Unitary variable cost = $12,000 per unit.

Total fixed costs for the company are $4,455,000.

Sales proportion:

Large forklift = 0.25

Small forklift = 0.75

To calculate the break-even point in units, we need to use the following formula:

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

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

Weighted average contribution margin = (0.25 * 80,000 + 0.75 * 60,000) - (0.25 * 26,000 + 0.75 * 12,000)

Weighted average contribution margin = 65,000 - 15,500 = 49,500

Break-even point (units) = 4,455,000 / 49,500

Break-even point (units) = 90 units