Bello Corporation produces and sells two products. In the most recent month, Product D99P had sales of $33,000 and variable expenses of $15,840. Product G71P had sales of $42,000 and variable expenses of $4,410. The fixed expenses of the entire company were $49,790.
-The break-even point for the entire company is closest to:

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin (CM) for each product:

CM for D99P = Sales - Variable expenses = $33,000 - $15,840 = $17,160
CM for G71P = Sales - Variable expenses = $42,000 - $4,410 = $37,590

Next, we need to calculate the weighted average contribution margin for the company:

Weighted Average CM = (CM for D99P x Sales mix for D99P) + (CM for G71P x Sales mix for G71P)
Sales mix for D99P = Sales of D99P / Total sales = $33,000 / ($33,000 + $42,000) = 0.44
Sales mix for G71P = Sales of G71P / Total sales = $42,000 / ($33,000 + $42,000) = 0.56

Weighted Average CM = ($17,160 x 0.44) + ($37,590 x 0.56) = $27,862.40

Finally, we can use the following formula to calculate the break-even point for the entire company:

Break-even point = Fixed expenses / Weighted Average CM
Break-even point = $49,790 / $27,862.40
Break-even point = 1.79

Therefore, the break-even point for the entire company is closest to $68,205 (rounded up).

Bello Corporation Produces and Sells Two Products