Question

17 Athletic Sports, Inc., produces high-quality sports equipment. The company's Racket Division manufactures two tennis rackets-the Standard and the Deluxe-that are widely used in amateur play. Selected information on the rackets is given below: 84.00 Standard 47.70 Deluxe 84.00 47.10 $ $ Selling price per racket Variable expenses per racket: Production Sales commission 28.10 $ $ 50.96 $ $ 21.40 2.45 5.50 501 CH 23.85 Sales in units over the past two months have been as follows: Standard April 5,000 May 4,000 Deluxe 3,000 3,500 All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs: $ Fixed production costs Advertising expense Administrative salaries Total Per Month 107,000 101,000 50,000 258,000 238,500 2385 252,006 50.94 Compute the Racket Division's break-even point in dollar sales for April. A $ 460,185 B $ 430,000 C S 467.920 S 469,091 516,000 238500 + 252,00

Answer 1

Answer : (c) $ 467920

Calculation

Break even point in Dollar sales = Fixed cost / Contribution margin Ratio

= $ 258000 / 55.1376 %

= $ 467920 ( Approx)

Working note -1

Computation of Contribution margin Ratio for april

	Standard	Deluxe	Total
Sales unit (a)	5000	3000
Selling price (b)	$ 47.70	$ 84
sales Revenue (a) * (b)	$ 238500	$ 252000	$ 490500
Variable cost
Production	$ 107000	$ 84300
Sales commision	$ 12250	$ 16500
Total variable cost	$ 119250	$ 100800
Contribution margin ( Sales - Variable cost )	$ 119250	$ 151200	$ 270450
Contribution margin ratio of Racket Division $ 270450*100 / $ 490500			55.1376 % ( Approx up to 4 Decimal place )