Answer:
Instructions are below,
Explanation:
Giving the following information:
Product A: Sales $514,000; Contribution Margin Ratio 30%
Product B: Sales $828,000; Contribution Margin Ratio 60%
fixed expenses are $338,000
First, we need to calculate the total contribution margin:
Total CM= CM Product A + CM Product B
Total CM= 514,000*0.3 + 828,000*0.6= $651,000
The operating income is calculated deducting from the total contribution margin the fixed costs:
Operating income= 651,000 - 338,000= 313,000
The average weighted contribution margin is calculated using the contribution margin ratio per product and the sales mix.
Sales mix:
Product A= 514,000/1,342,000= 0.38
Product B= 828,000/1,342,000= 0.62
Weighted average contribution= contribution margin ratio*sales mix
Product A= 0.3*0.38= 0.114
Product B= 0.6*0.62= 0.372
Total= 0.486
Weighted average contribution margin ratio= 0.486= 48.6%
Finally, we can calculate the break-even point in units:
Break-even point (units)= Total fixed costs / Weighted average contribution margin ratio
Break-even point (units)= 338,000/ 0.486= $695,473.25
