Exercise 6-10 Personal Electronix sells iPads and iPods. The quarter\'s activity

Question

Exercise 6-10 Personal Electronix sells iPads and iPods. The quarter's activity are presented below. business is divided into two divisions along product lines. CVP income statements for a recent Pad Division Pod Division Total Sales Variable costs Contribution margin Fixed costs Net income $671,000 496,540 $174,460 $429,000 $1,100,000 749,650 175,890 35,350 127,719 $222,631 253,110 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

Explanation / Answer

1) Sales Mix Percentage Ipad division 61% Ipod Division 39% Contribution Margin Ratio Ipad division 26% Ipod Division 41% 2) Weighted Average contribution Ratio 31.85% 3) Break even point in dollars $       4,01,002 4) Break even point Ipad division $       2,44,611 Ipod Division $       1,56,391 Workings: i. Sales Mix percentage = Individual sale/Total Sale Sales Mix percentage of: Ipad Division = $       6,71,000 / $       11,00,000 = 61% Ipod division = $       4,29,000 / $       11,00,000 = 39% ii. Contribution Margin ratio = Contribution Margin / Sales Contribution Margin ratio of: Ipad Division = $       1,74,460 / $       6,71,000 = 26% Ipod division = $       1,75,890 / $       4,29,000 = 41% iii. Weighted Average contribution Margin = (26%*61%)+(41%*39%) = 31.85% iv. Break even points in dollars = Fixed Costs/Weighted Average contribution Margin = $       1,27,719 / 31.85% = $       4,01,002 v. Break even of each division: Ipad Division Combined Break even x Proprtion of sales = $ 4,01,002 x 61% = $       2,44,611 Ipod division Combined Break even x Proprtion of sales = $ 4,01,002 x 39% = $       1,56,391

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