Question

Assume MIX Inc. has a sales volume of $1,144,000 for two products with May sales and contribution margin ratios as follows:

Product A: Sales $448,000; Contribution Margin Ratio 30%

Product B: Sales $696,000; Contribution Margin Ratio 60%

Required: Assume MIX’s fixed expenses are $316,000. Calculate the May total contribution margin, operating income, average contribution margin ratio, and breakeven sales volume. (Round "Average contribution margin ratio" answer to 2 decimal places. Round up "Breakeven sales volume" answer to the nearest whole dollar.)

Total Contribution margin ____

Operating Income_____

Average Contribution margin ratio_____%

Breakeven sales volume_______

Answer 1

a.

contribution on Product A (448,000*30%)	134,400
contribution on product B (696,000*60%)	417,600
total contribution margin	552,000

b.operating income:

total contribution margin	552,000
less: fixed costs	(316,000)
net operating income	236,000

c.average contribution margin ratio:

total contribution margin / total sales

=> 552,000 / (448,000+696,000)

=>0.4825

=>48.25%.

b. break even sales volume.

=> fixed costs / average contribution margin ratio

==>316,000 / 0.4825

=>$654,922.