Swifty Inc manufactures model airplanes and repair kits. The planes account for 90% of thesales mix, and the kits the remainder. The variable cost ratio for the planes is 95% and 80% forthe kits. Fixed costs are $52000. Compute the breakeven point in sales dollars.$800000$260000O $1040000O $1155556

Question
Asked Nov 2, 2019
Swifty Inc manufactures model airplanes and repair kits. The planes account for 90% of the
sales mix, and the kits the remainder. The variable cost ratio for the planes is 95% and 80% for
the kits. Fixed costs are $52000. Compute the breakeven point in sales dollars.
$800000
$260000
O $1040000
O $1155556
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Swifty Inc manufactures model airplanes and repair kits. The planes account for 90% of the sales mix, and the kits the remainder. The variable cost ratio for the planes is 95% and 80% for the kits. Fixed costs are $52000. Compute the breakeven point in sales dollars. $800000 $260000 O $1040000 O $1155556

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Expert Answer

Step 1

Compute total contribution margin using sales mix for the two products as shown below:

Contribution margin
Contributi on margin x
Sales mix of repair kits
Contribution margin x
Sales mix of model airplanes
for sales mix
=[(1-0.95)x0.90]+[1-0.80)x0.10]
0.045 0.02
=0.065 (or)6.5%
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Contribution margin Contributi on margin x Sales mix of repair kits Contribution margin x Sales mix of model airplanes for sales mix =[(1-0.95)x0.90]+[1-0.80)x0.10] 0.045 0.02 =0.065 (or)6.5%

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Step 2

Compute breakeven point in sales dollars using contribution...

Fixed cost
Breakeven point (in dollars
Contribution margin
$52, 000
6.5%
S800,000
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Fixed cost Breakeven point (in dollars Contribution margin $52, 000 6.5% S800,000

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