Question

Assume MIX Inc. has sales volume of $1,126,000 for two products with May sales and contribution margin ratios as follows: Product A: Sales $442,000; Contribution Margin Ratio 30% Product B: Sales $684,000; Contribution Margin Ratio 60% Required: Assume MIX’s fixed expenses are $314,000. Calculate the May total contribution margin, operating income, average contribution margin ratio, and breakeven sales volume.

Answer 1

Answer:

(1) $543,000

(2) $229,000

(3) 0.4822 or 48.22%

(4) 651,182

Explanation:

May total contribution margin:

= Product A contribution margin + Product B contribution margin

= ($442,000 × 30%) +  ($684,000 × 60%)

= $132,600 + $410,400

= $543,000

Operating income = Total contribution margin - Fixed cost

                               = $543,000 - $314,000

                               = $229,000

Average contribution margin ratio = Total contribution margin ÷ Total sales

                                                         =  $543,000 ÷ $1,126,000

                                                         = 0.4822 or 48.22%

Break-even sales volume = Fixed cost ÷ Average contribution margin ratio

                                           = $314,000 ÷ 0.4822

                                           = 651,182