Garrett Corporation sells two product lines. The sales mix of the product lines
ID: 2387954 • Letter: G
Question
Garrett Corporation sells two product lines. The sales mix of the product lines is: Standard, 60%; and Deluxe, 40%. The contribution margin ratio of each line is: Standard, 35% and Deluxe, 45%. Garrett's fixed costs are $1,950,000.Instructions:
1. Calculate the total dollar amount of Garrett Corporation's sales at the break-even point. Show your calculations to receive credit for your answer.
2. Calculate the dollar amount for each product line. Show your calculations to receive credit for your answer.
Explanation / Answer
Fixed Cost = 19,50,000 Contribution when goods worth 1$ is sold Cont from Standard= 0.6 * 0.35 = 0.21 Cont from Deluxe= 0.4 * 0.45 = 0.18 Sales = 1$ Contribution margin = 39% PV ratio= contribution/Sales *100 = 39% (in Mix) Break Even Sales = Fixed Cost/PV ratio = 19,50,000/.39 = $50,00,000 Sale of Standard =60% of 50,00,000 = $30,00,000 Sale of Deluxe = 40% 0f 50,00,000=$20,00,000
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