Question

Linburgh Inc manufactures model airplanes and repair kits. The planes account for 80% of the sales mix, and the kits the remainder. The variable cost ratio for the planes is 85% and 70% for the kits. Fixed costs are $99000. Compute the breakeven point in sales dollars.

Answer 1

Answer:

The correct answer is $550,000.

Explanation:

According to the scenario, the computation of the given data are as follows:

We can calculate the breakeven points in sales dollars by using following formula:

Breakeven points in sales dollar = Total Fixed Costs ÷ Weighted Average Contribution Margin Ratio

Where, Weighted Average Contribution Margin Ratio =  [15% × 0.80] + [30% × 0.20] = 0.18

By putting the value, we get

Breakeven points in sales dollar  = $99000 ÷ 0.18

= $550,000