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Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 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
A) $2,464,200.
B) $15,488,373.
C) $16,650,000.
D) $18,000,000.

Question

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Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 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
A) $2,464,200.
B) $15,488,373.
C) $16,650,000.
D) $18,000,000.

Quizplus · Accepted Answer

The break-even point in dollars is calculated by dividing the total fixed costs by the weighted average contribution margin ratio. The weighted average contribution margin ratio is (0.65 * 0.30) + (0.35 * 0.50) = 0.365. Therefore, the break-even point is $6,660,000 / 0.365 = $18,246,575, which is closest to option D.

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