Question

Sheridan Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Sheridan incurs $5920000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The break-even point in dollars is

Answer 1

$16,000,000

Step-by-step explanation:

Weighted average margin = (Sales mix of goods * Contribution margin) + (Sales mix of gear * Contribution margin)

Weighted average margin = (65%*30%) + (35%*50%)

Weighted average margin = 19.50% + 17.50%

Weighted average margin = 37%

Break-even point = Fixed costs / Weighted average contribution margin ratio

Break-even point = $5,920,000 / 37%

Break-even point = $5,920,000 / 0.37

Break-even point = $16,000,000

So, the break-even point in dollars is $16,000,000.