Gilpatric Corporation produces and sells two products. In the most recent month, Product Q71M had sales of $28,000 and variable expenses of $7,840. Product V04P had sales of $49,000 and variable expenses of $27,580. The fixed expenses of the entire company were $34,630. The break-even point for the entire company is closest to:
A)$70,050
B)$64,130
C)$34,630
D)$42,370

Question

Quizplus · Accepted Answer

To find the break-even point for the entire company, we need to first calculate the contribution margin ratio for each product.

For Product Q71M: 
Contribution Margin = Sales - Variable Expenses 
Contribution Margin = $28,000 - $7,840 = $20,160 
Contribution Margin Ratio = Contribution Margin / Sales 
Contribution Margin Ratio = $20,160 / $28,000 = 0.72

For Product V04P: 
Contribution Margin = Sales - Variable Expenses 
Contribution Margin = $49,000 - $27,580 = $21,420 
Contribution Margin Ratio = Contribution Margin / Sales 
Contribution Margin Ratio = $21,420 / $49,000 = 0.437

Now we can use the contribution margin ratio to find the break-even point for the entire company:

Break-Even Point = Fixed Expenses / Contribution Margin Ratio 
Break-Even Point = $34,630 / (0.72 + 0.437) 
Break-Even Point = $34,630 / 1.157 
Break-Even Point = $29,911.24

Therefore, the closest answer choice is B) $64,130.

Gilpatric Corporation Produces and Sells Two Products