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Concord Inc manufactures model airplanes and repair kits. The planes account for 75% of the sales mix, and the kits the remainder. The variable cost ratio for the planes is 80% and 65% for the kits. Fixed costs are $76000. Compute the breakeven point in sales dollars.

Answer :

Shahzaibfaraz

Answer:

The breakeven point in sales dollars is $320000.

Explanation:

To calculate the break even point in dollars, we first need to calculate the weighted average contribution margin ratio as there are more than one products.

As the variable cost ratio for planes is 80%, the contribution ratio of planes will be 1 - 80% = 20%. Similarly, for kits, it will be 1-65% = 35%

The weighted average contribution margin = (0.75 * 0.2) + (0.25 * 0.35) = 0.2375 or 23.75%

The breakeven point in dollars = 76000 / 0.2375 = $320000

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