Question

Swifty Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of...

Swifty Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its three product lines is birthday candles 30%, standard tapered candles 60%, and large scented candles 10%. The contribution margin ratio of each candle type is shown below.

Candle Type

Contribution Margin Ratio

Birthday 20%
Standard tapered 35%
Large scented 50%
What is the weighted-average contribution margin ratio?
Weighted-average contribution margin ratio %
If the company’s fixed costs are $533,440 per year, what is the dollar amount of each type of candle that must be sold to break even?

Birthday

Standard tapered

Large scented

Total break-even point $ $ $

Homework Answers

Answer #1

Solution :

(1) Weighted Average Contribution Margin Ratio :

Particulars Birthday Standard Large Total
(a) Sales % 30% 60% 10% 100%
(b) Contribution Margin Ratio 20% 35% 50%
(c) Weighted Contribution (a * b) 6% 21% 5% 32%

weighted-average contribution margin ratio = 32%

(2)

Total Breakeven Sales in Dollars = Fixed Cost / Weighted Average Contribution Margin Ratio

= $ 533,440 / 32%

= $ 1,667,000

Particulars Birthday Standard Large
(a) Sales % 30% 60% 10%
(b) Breakeven Sales ($ 1,667,000 * a) $ 500,100 $ 1,000,200 $ 166,700

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