Question

Bramble Corp. has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Bramble incurs $6290000 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

Break even in dollars is $17000000

Step-by-step explanation:

The break even in dollars is calculated by dividing the fixed costs by the weighted average contribution ratio.

Weighted average contribution ratio = Weightage of Product A in sales mix * contribution margin ratio of Product A + Weightage of product B in sales mix * Contribution margin ratio of Product B

Thus, weighted average contribution margin ratio = 0.65 * 0.3 + 0.35 * 0.5

Weighted average contribution margin ratio = 0.37 or 37%

Break even in dollars = Fixed costs / weighted average contribution margin ratio

Break even in dollars = 6290000 / 0.37

Break even in dollars = $17000000