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26 October, 12:13

Assume MIX Inc. has sales volume of $1,126,000 for two products with May sales and contribution margin ratios as follows: Product A: Sales $442,000; Contribution Margin Ratio 30% Product B: Sales $684,000; Contribution Margin Ratio 60% Required: Assume MIX's fixed expenses are $314,000. Calculate the May total contribution margin, operating income, average contribution margin ratio, and breakeven sales volume.

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  1. 26 October, 13:27
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    (1) $543,000

    (2) $229,000

    (3) 0.4822 or 48.22%

    (4) 651,182

    Explanation:

    May total contribution margin:

    = Product A contribution margin + Product B contribution margin

    = ($442,000 * 30%) + ($684,000 * 60%)

    = $132,600 + $410,400

    = $543,000

    Operating income = Total contribution margin - Fixed cost

    = $543,000 - $314,000

    = $229,000

    Average contribution margin ratio = Total contribution margin : Total sales

    = $543,000 : $1,126,000

    = 0.4822 or 48.22%

    Break-even sales volume = Fixed cost : Average contribution margin ratio

    = $314,000 : 0.4822

    = 651,182
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