Exercise 19-10 (Part Level Submission) Personal Electronix sells iPads and iPods

Question

Exercise 19-10 (Part Level Submission) Personal Electronix sells iPads and iPods. The business is divided into two divisions along product lines. CVP income statements for a recent quarter’s activity are presented below. iPad Division iPod Division Total Sales $748,800 $421,200 $1,170,000 Variable costs 546,624 231,660 778,284 Contribution margin $202,176 $189,540 391,716 Fixed costs 135,259 Net income $256,457 (a) Determine sales mix percentage and contribution margin ratio for each division. (Round answers to 0 decimal places, e.g. 15%.) Sales Mix Percentage iPad division % iPod division % Contribution Margin Ratio iPad division % iPod division    calculate the companys weighted average contribution margin ratio, calculate the companys break even point in dollars, determine the sales level in dollars for each division at the break even point

Explanation / Answer

Answer:-Sales mix percentage :-

iPad Division =($748800/$1170000)*100 =64%

iPod Division =($421200/$1170000)*100 =36%

Contribution margin ratio:-

iPad Division =($202176/$748800)*100 =27%

iPod Division =($189540/$421200)*100 =45%

Company’s weighted average contribution margin ratio

=(Total contribution margin/Total sales dollars)*100

=($391716/$1170000)*100 =33.48%

Company’s break even point in dollars=Fixed costs/ Weighted average contribution margin ratio

=$135259/33.48% =$403999

Sales level in dollars for each division at the break even point:-

iPad Division=$403999*64% =$258559

iPod Division=$403999*36% =$145440

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