Question

Blue Chance Co. sells computers and video game systems. The business is divided into two divisons along product lines. Variable costing income statements for the current year are presented below:

Computer VG Systems Total

Sales $700,000 $300,000 $1,000,000

Variable Costs 420,000 210,000 630,000

Contribution Margin $280,000 $90,000 370,000

Fixed Costs 296,000

Net Income $74,000

Instruction:

A. Determine the sales mix and contribution margin ratio for each division.

B. Calculate the company's weighted average contribution margin ratio.

C. Calculate the company's break-even point in dollars

D. Determine the sales level, in dollar, for each division at the break-even point.

Answer 1

Answer:

ratio = 7 : 3  

Weighted average contribution ratio = 37 %

break-even point = $800,000

sales level = $560,000

Sales level = $240,000

Explanation:

Solution

we know here that contribution margin for computer is express as

contribution margin for computer = $\frac{280000}{700000}$

contribution margin for computer =  40%

and

Contribution margin for VG Systems is = $\frac{90000}{300000}$

Contribution margin for VG Systems is = 30%

so  

ratio = (40 + 30 ) : 30 = 7 : 3  

and

Weighted average contribution margin ratio are here

Weighted average contribution ratio = 40% × 0.7 + 30% × 0.3

Weighted average contribution ratio = 37 %

and

break even point in dollars are

break-even point = $\frac{296000}{37}$

break-even point = $800,000

and

sales level are here

sales level for computer  = 800000 × 70%  

sales level = $560,000

and

Sales level for VG systems: 800000 × 30%

Sales level = $240,000

Answer 2

The Blue Chance company's results on the basis of the given details are:

(a). The sale mix and the contribution margin ratio = 7 : 3  

(b). Weighted average contribution ratio = 37 %

(c). Break-even point = $800,000

(d). Sales level = $560,000, and $240,000

What is the break-even point?

The Break-even point occurs where the demand is equal to the supply of any product in the market. It also means the total cost and the total revenue are equal.

(a). Computation of contribution margin:

According to the given information,

Contribution margin = $280,000

Sales = $700,000

Then the contribution margin for the computer is:

$\text{Contribution Margin For Computer} = \dfrac{\text{Contribution Margin}}{\text{Sales}}\\\text{Contribution Margin For Computer} =\dfrac{\ 280,000}{\ 700,000}\\\\\text{Contribution Margin For Computer} =40\%$

And, the contribution margin for VG Systems is:

$\text{Contribution Margin For Computer} = \dfrac{\text{Contribution Margin}}{\text{Sales}}\\\text{Contribution Margin For Computer} =\dfrac{\ 90,000}{\ 300,000}\\\\\text{Contribution Margin For Computer} =30\%$

Therefore, the contribution margin ratio is:

$=\dfrac{40\%+30\%}{30\%}\\=7:3$

(b). Computation of weighted contribution margin ratio:

$\text{Weighted Average Contribution Ratio} = 40\% \times 0.7 + 30\% \times 0.3\\\\\text{Weighted Average Contribution Ratio} = 37\%$

(c). Computation of break-even point in dollars:

$\text{Break-even Point} =\dfrac{\text{Fixed Cost}}{\text{Contribution Ratio}}\\\\\text{Break-even Point} =\dfrac{\ 296,000\times 100}{37}\\\\\text{Break-even Point} = \ 800,000$

(d). Computation of sales level:

$\text{Sales Level For Computer} = \text{Break-even Point in dollar} \times 70\%}\\\text{Sales Level For Computer} =800000 \times \frac{70}{100}\\\text{Sales Level For Computer} =\ 560,000$

$\text{Sales Level For VG system} = \text{Break-even Point in dollar} \times 30\%}\\\text{Sales Level For VG system} =\ 800,000 \times \frac{30}{100}\\\text{Sales Level For VG system} =\ 240,000$

Therefore, the sales levels are $560,000 and $240,000.

Learn more about the break-even point, refer to:

https://brainly.com/question/26883531