A firm produces three products. Product A sells for $60; its variable costs are $20. Product B sells for $200; its variable costs are $120. Product C sells for $25; its variable costs are $10

Last year, the firm sold 1000 units of A, 2000 units of B, and 10,000 units of C. The firm has fixed costs of $320,000 per year. Calculate the break-even point of the firm.

Calculations for this problem are:

Product Selling price P Variable cost V V/P 1-V/P Sales Percent of sales Weighted contrib.
A $60 $20 .333 .667 $60,000 .0845 .0564
B $200 $120 .600 .400 $400,000 .5634 .2254
C $25 $10 .400 .600 $250,000 .3521 .2113
$710,000 1.0000 .4931

Break-even for this firm is $320,000/.4931 = $648,956. Note: this result reflects calculator rounding, as students might experience at exam time. Excel reports $649,143.