Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $500 and has a unit contribution margin of $200; the Adult model sells for $930 and has a unit contribution margin of $372; and the Recreational model sells for $1,400 and has a unit contribution margin of $560. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $5,680,000, calculate the firm's break-even point in total sales dollars.

Respuesta :

Answer:

$14,200,000

Explanation:

The computation of the firm break even point in total sales dollars is shown below:

Particulars                 Youth              Adult                 Recreational

Sales mix

ratio                             0.25                0.45                  0.30

(5:9:6)

Contribution

margin                     $200                 $372                  $560

Weighted

average CM               50                  167.4                  168

Selling price             $500               $930                  $1,400

Weighted

average sales           125                   418.50               420

Weighted average

sales                                963.50

Weighted average

CM                                  385.40

CM ratio                          40%  (385.40 ÷ 963.50)

Now the break even point in sales dollars is

= Fixed cost ÷ contribution margin ratio

= $5,680,000 ÷ 40%

= $14,200,000