[The following information applies to the questions displayed below.]
Grayson Enterprises manufactures springs and shock absorbers.Springs account for 40% of the company's total sales revenue,whereas shocks account for about 60%.The contribution margin ratios for springs and shocks are 45% and 35%,respectively.Grayson's fixed costs average $450,000 per month.
-Unique Corporation manufactures two products;data are shown below: If Unique's monthly fixed costs average $400,000,what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar. )

Question

[The following information applies to the questions displayed below.]
Grayson Enterprises manufactures springs and shock absorbers.Springs account for 40% of the company's total sales revenue,whereas shocks account for about 60%.The contribution margin ratios for springs and shocks are 45% and 35%,respectively.Grayson's fixed costs average $450,000 per month.
-Unique Corporation manufactures two products;data are shown below:  If Unique's monthly fixed costs average $400,000,what is its break-even point expressed in sales dollars? (Round the answer to the nearest dollar. )

Quizplus · Accepted Answer

To calculate the break-even point in sales dollars, we need to use the formula:

Break-even point (in sales dollars) = Fixed costs / Contribution margin ratio

For Unique Corporation, we need to calculate the weighted average contribution margin ratio using the information provided:

Weighted average contribution margin ratio = (Contribution margin ratio of Product A x Sales mix of Product A) + (Contribution margin ratio of Product B x Sales mix of Product B)

Sales mix of Product A = 40% 
Sales mix of Product B = 60%

Contribution margin ratio of Product A = 30% 
Contribution margin ratio of Product B = 40%

Weighted average contribution margin ratio = (0.30 x 0.40) + (0.40 x 0.60) = 0.36

Using the formula above, we can calculate the break-even point in sales dollars:

Break-even point = $400,000 / 0.36 = $1,111,111

Therefore, the closest answer choice to the calculated break-even point is D) $1,052,632.

[The Following Information Applies to the Questions Displayed Below