Question

Dixie 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 50%, and large scented candles 20%. The contribution margin ratio of each candle type is shown below. Candle Type Contribution Margin Ratio Birthday 20% Standard tapered 30% Large scented 40% What is the weighted-average contribution margin ratio? (Round answer to 0 decimal places, e.g. 15.) Weighted-average contribution margin ratio % If the company’s fixed costs are $392,950 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 $ $ $

Answer 1

• All working forms part of the answer
• Requirement 1

	Sales Mix	CM Ratio	Weighted Average CM Ratio
	[A]	[B]	[C = A x B]
Birthday	30%	20%	6.00%
Standard Tapered	50%	30%	15.00%
Large Scented	20%	40%	8.00%
Total Weighted Average contribution margin ratio			29.00% [ANSWER]

• Requirement 2

Total Break even = $ 392950 fixed cost / 29% CM ratio weighted = $ 1,355,000

	Birthday	Standard Tapered	Large Scented
Total Break even point = ANSWER	$406,500	$677,500	$271,000
	$1355000 x 30%	$1355000 x 50%	$1355000 x 20%