intE20-10 Personal Electronix sells iPads and iPods. The business is divided int

Question

intE20-10 Personal Electronix sells iPads and iPods. The business is divided into two divi- s sions along product lines. CVP income statements for a recent quarter's activity are pre- sented below iPad Division $600,000 420,000 $180,000 Total $1,000,000 680,000 320,000 120,000 iPod Division Sales Variable costs Contribution margin Fixed costs Net income $400,000 260,000 $140,000 S 200,000 Instructions (a) Determi (b) Calculate the companys weighted-a (c) Calculate the companvs break-even point in dollars ine sales mix percentage and contribution margin ratio for each division. e coniribution margin ratio. s level in doillars lor cach division at the break-even point nc

Explanation / Answer

Personal Electronix i pad Division I pod Division Total Sales $         600,000.00 $     400,000.00 $ 1,000,000.00 a) Sales Mix Percentage=($600000/$1000000) for i pad division,($400000/$1000000) for ipod division 60% 40% 100% Contribution Margin $         180,000.00 $     140,000.00 $      320,000.00 Contribution Margin ratio=($180000/$600000) for I pad division,($140000/$400000) for I pod division) 30.00% 35.00% b) Weighted Average Contribution Margin Ratio Total Contribution Margin $         320,000.00 Total Sales $     1,000,000.00 Weighted Average Contribution Margin Ratio=($320000/$1000000) 32.00% c ) Breakeven Point in Dollars=Fixed Cost/Contribution Margin Ratio Fixed Cost $         120,000.00 Contribution Margin Ratio 32.00% Breakeven Point in Dollars=(120000/32%) $         375,000.00 d) Sales level in dollars for each division at the breakeven Breakeven Point in dollars*Sales Mix I Pad Division I Pod Division Total ($375000*60%) $         225,000.00 $      225,000.00 ($375000*40%) $     150,000.00 $      150,000.00 Total $      375,000.00

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