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Lilly’s lilacs sells two different potted plants – A and B. The weighted average perunit contribution margin is $30 and Lily’s fixed costs are $24,000. The sales mix is60% - A and 40% - B. Which of the following statements are true? Check all thatapply. a. Lily, must sell a total of 800 plants to break even. YESb. If Lily sells 480 units of both A and B she will have a net profit. YES. c. Lily must sell 320 units of potted plant A to break-even. NO. d. If Lily’s sales mix changes, her break-even point will stay the same. NO.

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Answer:

A) Lily, must sell a total of 800 plants to break even.

B) If Lily sells 480 units of both A and B she will have a net profit.

D) If Lily’s sales mix changes, her break-even point will stay the same.

Explanation:

break even point = total fixed costs / contribution margin

  • total fixed costs = $24,000
  • average contribution margin = $30 (same for both plants)

break even point in units = $24,000 / $30 = 800 units

current sales mix:

plants A = 800 units x 60% = 480 units

plants B = 800 units x 40% = 320 units

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