Question

Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 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

Answer: $6,000,000

       

Explanation: This could be calculated as follows :-

sales for sporting goods  = 65% of $2,220,000

                                            = $ 1,443,000

sales for sports gear = 35% of $2,220,000

                                    = $ 777,000

Now, calculating for contribution :-

Sporting goods = 30% of $ 1,443,000

                     = $ 432900

Sports gear = 50% of 777000

                      =$ 388500

Therefore :-

total contribution margin = $388500 + 433900 = $ 821400

overall margin contribution = (821400/2220000)*100 = 37%

Break even point = 2220000/0.37 = $6,000,000