Hill Toppers sells two types of hiking boots, the Voyager and the Traveler.The Voyager sells for $150 and has a contribution margin of $60.The Traveler sells for $100 and has a contribution margin of $60.Total revenue for the period is $300,000 and total fixed costs are $125,000.Each product contributes 50% to total revenue.Using the weighted contribution margin ratio, calculate break-even sales volume.

Question

Quizplus · Accepted Answer

The weighted contribution margin ratio is calculated by taking the average contribution margin ratio of both products, weighted by their revenue contribution. Since both products contribute equally to revenue, the weighted contribution margin ratio is the same as the individual contribution margin ratio, which is $60/$150 = 0.4 for Voyager and $60/$100 = 0.6 for Traveler. The average is (0.4 + 0.6) / 2 = 0.5. The break-even sales volume is total fixed costs divided by the weighted contribution margin ratio: $125,000 / 0.5 = $250,000.

Hill Toppers Sells Two Types of Hiking Boots, the Voyager