Information about the Harmonious Company's two products includes: $\begin{array}{llr}&\text { Product } X & \text { Product } Y\
\text { Unit selling price } & \$ 11.25 & \$ 11.25 \
\text { Unit variable costs: } \
\text { Manufacturing }& \$ 5.25 & \$ 6.75 \
\text { Selling } & .75& .75 \
\text { Total }&\$6.00 &\$7.50\
\end{array}$
$\begin{array}{lr}
\text { Monthly fixed costs are as follows: } & \
\text { Manufacturing } & \$ 82,500 \
\text { Selling and administrative } & 45,000 \
\text { Total } & \$ 127,500
\end{array}$
If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total sales dollars is

Question

Information about the Harmonious Company's two products includes: $\begin{array}{llr}&\text { Product } X & \text { Product } Y\
\text { Unit selling price } & \$ 11.25 & \$ 11.25 \
\text { Unit variable costs: } \
\text { Manufacturing }& \$ 5.25 & \$ 6.75  \
\text { Selling } & .75&  .75 \
\text { Total }&\$6.00 &\$7.50\
\end{array}$
$\begin{array}{lr}
\text { Monthly fixed costs are as follows: } & \
\text { Manufacturing } & \$ 82,500 \
\text { Selling and administrative } & 45,000 \
\text { Total } & \$ 127,500
\end{array}$
If the sales mix in units is 50 percent Product X and 50 percent Product Y, the monthly break-even total sales dollars is

Quizplus · Accepted Answer

The correct answer is B because the monthly break-even total sales dollars is $318,746. This can be calculated using the following formula:Break-even total sales dollars = Fixed costs / (Contribution margin ratio)Contribution margin ratio = (Selling price - Variable costs) / Selling priceFor Product X:Contribution margin ratio = ($11.25 - $6.00) / $11.25 = 0.4667For Product Y:Contribution margin ratio = ($11.25 - $7.50) / $11.25 = 0.3333Weighted-average contribution margin ratio = (0.50 * 0.4667) + (0.50 * 0.3333) = 0.4000Break-even total sales dollars = $127,500 / 0.4000 = $318,746

Information About the Harmonious Company's Two Products Includes If the Sales Mix in Units Is 50 Percent Product