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Could not manage to come up to the minimum revenue required and could not understand how it is explained in the answer
For breakeven we need the total contribution to be $9,000.
If they made maximum demand of X, the revenue would be $24,000 and the contribution would be $7,200.
If they made maximum demand of Y, the revenue would be $14,400 and the contribution would be $7,200.Given that the question wants to know the minimum revenue needed to breakeven it would therefore mean they should first make 3,000 units of Y. That would leave them needed extra contribution of 9,000 – 7,200 = $1,800 so they would get this by making X’s so as to get revenue of 1,800/0.3 = $6,000
So the total revenue needed = 14,400 + 6,000 = $20,400
I could not understand the part where you say ‘That would leave them needed extra contribution of 9,000 – 7,200 = $1,800’ does the 9,000 represent the Fixed Cost?
As I wrote in the first line of my previous reply, to achieve breakeven the total contribution must be $9,000. As always for breakeven the contribution must equal the fixed costs.
I suggest that you watch my free lectures on CVP analysis. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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