Break-even analysis: It is an analysis and study of variables with goal to find a point where a company is neither making profits nor suffering any losses. The Overall contribution margin ratio and overall break-even point in dollar sales.
Break-even analysis: It is an analysis and study of variables with goal to find a point where a company is neither making profits nor suffering any losses. The Overall contribution margin ratio and overall break-even point in dollar sales.
Break-even analysis: It is an analysis and study of variables with goal to find a point where a company is neither making profits nor suffering any losses.
The Overall contribution margin ratio and overall break-even point in dollar sales.
Expert Solution & Answer
Answer to Problem 10E
Solution:
The Contribution Margin Ratio is 30%
Break-Even point in dollar sales is $ 80,000
Verification of Break-Even point with the construction of the contribution format income statement by showing the appropriate levels of sales for the two products is shown below.
Explanation of Solution
A contribution margin ratio is computed by dividing the total contribution margin by total Sales revenue from both products. An overall break-even point is ascertained by dividing the total fixed expense of both products by the overall contribution margin ratio.
Lucido Products contribution format income statement
Claimjumper
Makeover
Total
Sales
$30,000
$70,000
$100,000
Variable expenses
$20,000
$50,000
$70,000
Contribution margin
$10,000
$20,000
$30,000
Fixed expenses
$7,200
$16,800
$24,000
Net operating income
$2,800
$3,200
$6,000
Given:
Claimjumper
Makeover
Total
Sales
$30,000
$70,000
$100,000
Variable expenses
$20,000
$50,000
$70,000
Contribution margin
$10,000
$20,000
$30,000
Fixed expenses
$24,000
Net operating income
$6,000
Conclusion
Hence, the Overall CM ratio 30% and Overall break-even point in dollar sales is $80,000 in case of Lucido Products. A contribution margin ratio is basically the percentage of contribution margin with sales revenue.
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