Question

E19.10 (LO2) Personal Electronix sells computer tablets and MP3 players. The business is divided into two divisions along product lines. CVP income statements for a recent quarter's activity are presented below. Tablet Division MP3 Player Division Total Sales $600,000 $400,000 $1.000.000 Variable costs 420.000 260,000 680,000 Contribution margin $180,000 $140,000 320,000 Fixed costs 120,000 Net income $ 200.000 Instructions a. Determine the sales mix percentage based on sales revenue and contribution margin ratio for each division b. Calculate the company's weighted-average contribution margin ratio. c. Calculate the company's break-even point in dollars. d. Determine the sales level in dollars for each division at the break-even point.

Answer 1

Answer

• Requirement [a]

		Tablet	MP3
A	Sales	$600,000	$400,000
B	Total Sales	$1,000,000	$1,000,000
C = (A/B) x 100	Sales Mix Percentage	60%	40%	Answer
D	Contribution margin	$180,000	$140,000
E = (D/B) x 100	Contribution margin ratio	30%	35%	Answer

• Requirement [b]
  Weighted average CM Ratio
  = (30% x 60%) + (35% x 40%)
  = 18% + 14%
  = 32%
• [c]
  Break even point in dollars = $ 120000 fixed cost / 32% CM ratio
  = $ 375,000
• [d]
  Sales level in dollars for:
  >tablet division = $ 375000 x 60% = $ 225,000
  >MP3 player = $ 375000 x 40% = $ 150,000