Question

Swanson company has two divisions; sporting goods and sports gear. the sales mix is 65% for sporting goods and 35% for sports gear. swanson incurs $6,660,000 in fixed costs. the contribution margin ratio for sporting goods is 30%, while for sports gear it is 50%. the break-even point in dollars is

Answer 1

Answer:

14,400,000 is the answer

Answer 2

We are given
fixed cost, F = $6,660,000
sales mix:
65% sporting goods
35% sports gear
margin ratio:
30% sporting goods
50% sports gear

Now, we solve for the break even point in dollars. We use the formula
x = total fixed cost / [ price - total variable cost/price ]
Using the given values
x = 6660000 / [0.65(0.3)(6660000) + .35(0.5)(660000)]/ [(0.3)(6660000) + (0.5)(660000)]
x = $14,400,000

The breakeven point is $14,400,000
This is the sales when the revenue is just equal to the total cost of producing the products resulting to zero profit.