Question

Determine break-even point in dollars for two divisions. 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 S1.000.000 Variable costs 420,000 260,000 680,000 Contribution margin S180,000 $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:-a)- Sales mix percentage = Tablet Division = ($600000/$1000000)*100 =60%

MP3 Player Division = ($400000/$1000000)*100 =40%

Contribution margin ratio- (Contribution margin/Sales)*100

Tablet Division = ($180000/$800000)*100 =30%

MP3 Player Division = ($140000/$400000)*100 =35%

b)-Weighted average contribution margin ratio =Contribution margin ratio* Sales mix percentage

= (30%*60%)+(35%*40%)

= 18%+14%                                                    

= 32%

c)- Company’s Break even point in sales dollars= Fixed costs/ Weighted average contribution margin ratio

= $120000/32%

= $375000

d)-Total break even point in $:-

Tablet Division =$375000*60% = $225000

MP3 Player Division = $375000*40% = $150000