Question

Part 1: Based on the data presented in the Spreadsheet Template below (CM Breakeven tab):

• Calculate the contribution margin (CM) for each of the three products sold at the cookie business.
• Calculate the weighted average CM.
• Calculate the breakeven point.

Discuss the results based on your calculations as far as which type of cookie you think is the most profitable, which has the highest CM, etc.

Cookie Business
	Chocolate Chip	Sugar	Specialty	Total
Units Sold	1,500,000	980,000	300,000	2,780,000
Sales	$   1,875,000.00	$    882,000.00	$ 1,050,000.00	$          3,807,000.00
Less: Variable Costs	$       690,000.00	$    205,800.00	$        81,000.00	$              976,800.00
Contribution Margin	$   1,185,000.00	$    676,200.00	$      969,000.00	$          2,830,200.00
Less: Common Fixed Costs				$              125,000.00
Profit				$          2,705,200.00
Per item Contribution Margin
Weighted Average Contribution Margin
Break-even point in units

Answer 1

Per item of Contribution margin per unit
			Chocolate chip	Sugar	Speciality
Sales			1875000	882000	1050000
Less: Variable cost		690000	205800	81000
Contribution margin		1185000	676200	969000
Divide: Units sold		1500000	980000	300000
Contribution margin per unit	0.79	0.69	3.23
Weighted Average contribution margin
Total Contribution			28,30,200
Divide: Total Units			27,80,000
Weighted Average contribution margin	1.02
Break even units:
Total Fixed cost			1,25,000
Divide: Weighted average contribution margin	1.02
Break even units:			122549