X Company is starting a new merchandising business and provides the following budgets for its two products:
Product | Revenue | Total CM |
A | $352,080 | $176,366 |
B | 247,800 | 38,550 |
Next year's budgeted fixed costs are $220,000. X Company would like
to at least break even in its first year of operation; what must
total sales be in order for that to happen [round unit numbers to
two decimal places]? Assume that the budgeted product mix will not
change.
Product A | Product B | Total | ||
A | Ravenue | $ 3,52,080 | $ 2,47,800 | $ 5,99,880 |
B | Contribution Margin | $ 1,76,366 | $ 38,550 | $ 2,14,916 |
C | Contribution Ratio (B/A) | 50.09% | 15.56% | |
Contribution Margin sales mix ratio | ||||
Product A | =$176366/214916 | 82.06% | ||
Product B | =$38550/214916 | 17.94% | ||
The break even point means the point at which contribution margin is equal fixed cost | ||||
hence for break even point total contribution should be equal to $220000 | ||||
Contribution margin | Contribution ratio | Revenue | ||
Product A | 180538.07 | 50.09% | $ 3,60,408.72 | |
Product B | 39461.93 | 15.56% | $ 2,53,661.90 | |
Total | $ 2,20,000.00 | $ 6,14,070.61 | ||
Total sales must be $614070.61 | ||||
X Company is starting a new merchandising business and provides the following budgets for its two...
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