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 \$ \$ \$

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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