The sales mix percentages for Novotna's Boston and Seattle Divisions are 70% and 30%. The contribution margin ratios are: Boston (40%) and Seattle (30%). Fixed costs are $2,220,000. What is Novotna's break-even point in dollars?

Question

Quizplus · Accepted Answer

The break-even point in dollars can be calculated using the weighted average contribution margin ratio. First, calculate the weighted average contribution margin ratio: (70% * 40%) + (30% * 30%) = 28% + 9% = 37%. Then, divide the total fixed costs by this ratio: $2,220,000 / 37% = $6,000,000 / 0.37 = $6,342,856.

The Sales Mix Percentages for Novotna's Boston and Seattle Divisions