The following data are available for the Valentine Corporation for a recent month: Product A Product B Product C Total Selling price $23 $69 $115 Sales $115,000 $172,500 $287,500 Variable $91,000 $104,000 $27,000 Expenses Contribution Margin $24,000 $68,500 $260,500 Fixed $55,000 Expenses Net Operating Income
Answer)
Calculation of Weighted Average Contribution Margin Ratio
|
|
Product A |
Product B |
Product C |
Total |
|
Sales Revenue (X) |
$ 1,15,000 |
$ 1,72,500 |
$ 2,87,500 |
$ 5,75,000 |
|
Contribution Margin (Y) |
$ 24,000 |
$ 68,500 |
$ 2,60,500 |
|
|
Contribution margin ratio (Y/ X) |
20.87% |
39.71% |
90.61% |
|
|
Sales mix |
20% |
30% |
50% |
|
|
Weighted Average Contribution margin ratio |
4.17% |
11.91% |
45.30% |
61.39% |
Calculation of Overall Breakeven sales revenue
Overall Breakeven sales revenue = Total Fixed Costs/ Weighted Average Contribution margin ratio
Overall Breakeven sales revenue = $ 55,000/ 61.39%
Overall Breakeven sales revenue = $ 89,589 (rounded off)
Calculation of Sales revenue of Product C at Break-even point
Sales Revenue of Product C at breakeven point = Overall breakeven sales revenue X Sales mix of Product C
Sales Revenue of Product C at breakeven point = $ 89,589 X 50%
Sales Revenue of Product C at breakeven point = $ 44,795.
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