Question

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $3,330,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point?

Answer 1

The break-even point of sales for sporting goods division is $7,215,000.

Step-by-step explanation:

fixed cost (sporting goods) = total fixed cost*sales percentage

= $3,330,000*65%

= $2,164,500

The fixed cost assigned to sporting goods is $2,164,500 it is calculated by multiplying total fixed cost $3,330,000 and sales percentage 65%. The fixed cost amount of $3,330,000 is a total fixed cost which is for both divisions, therefore, to calculate the total cost assigned to only sports division sales percentage is used.

break even point = fixed cost/contribution margin%

= $2,164,500/30%

= $7,215,000

Therefore, The break-even point of sales for sporting goods division is $7,215,000.