Question:
Vargo Video sells not only DVD players but TV sets as well. Vargo sells its two products in the following amounts: 1,500 DVD players and 500 TVs. The sales mix, expressed as a function of total units sold, is as follows.
Kale Garden Supply Company has two divisions-Indoor Plants and Outdoor Plants. Each division has hundreds of different types of plants and plant-care products.
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Indoor Plant Division
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Outdoor Plant Division
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Total
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Sales
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$200,000
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$800,000
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$1,000,000
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Variable costs
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120,000
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560,000
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680,000
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Contribution margin
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$80,000
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$240,000
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$320,000
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Sales-mix percentage(Division sales ± Total sales)
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$200,000/$1,000,000
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0.20
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$800,000/$1,000,000
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0.80
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Contribution margin ratio(Contribution margin ± Sales)
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$80,000/$200,000
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0.40
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$240,000/$800,000
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0.30
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$320,000/$1,000,000
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0.32
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Total fixed costs = $300,000
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First, determine the weighted-average contribution margin.
Second, calculate break-even point in dollars.