Question

The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Answer 1

$6,000,000

Step-by-step explanation:

The formula to compute the break even point in dollars is shown below:

= (Fixed expenses ) ÷ (Contribution margin ratio)

= $2,220,000 ÷ 37%

= $6,000,000

The contribution margin ratio would be

= 70% × 40% + 30% × 30%

= 28% + 9%

= 37%

It shows a relationship between the fixed expense and the contribution margin ratio so that the accurate amount can come