Question

In: Accounting

Data on the two products are as follows : Alpha BETA Sales in volume in units...

Data on the two products are as follows :

Alpha BETA
Sales in volume in units 520 420
units sale price $300 $400
units variable cost 200 240
units contribution margin $100 $160

Total fixed costs for the manufacture of both products are $100,000.

Assuming that sales mix in terms of unit remains constant, what is the breakeven point in total revenue dollars?

Solutions

Expert Solution

Calculation:

Alpha Beta
Unit sale price 300 400
Unit variable cost (200) (240)
Unit contribution margin 100 160
Contribution margin ratio (Unit contribution margin/Unit sale price) 33.33% 40%

Weighted average contribution margin ratio = (Contribution margin ratio of Alpha x Sales volume of Alpha + Contribution margin ratio of Beta x Sales volume of Beta)/(Total sales volume of Alpha and Beta)

= (33.33% x 520 + 40% x 420)/(520 + 420)

= (173.33 + 165)/940

= 338.33/940

= 36%

Break even point in total revenue dollars = Fixed costs/Weighted average contribution margin ratio

= 100,000/36%

= $277,778

ekkarill92 answered 2 years ago
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