HOW AM I SUPPOSED TO COME UP WITH THE CONTRIBUTIOM MARGIN RATIO OF 75%?? NO ONE WILL EXPLAIN THAT TO ME? I CANT MOVE ON WITH TRYING TO UNDERSTAND THIS QUESION OR ANY SIMILIAR BECAUSE I DONT KNOW HOW TO GET THE CONTRIBUTION MARGIN RATION????????

Mowing Motors sells two different products. Here are the monthly revenues and costs:

Product A

• Sales quantity: 12,000 units
• Price per unit: $5.50
• Variable costs per unit: $1.15

Product B

• Sales quantity: 18,000 units
• Price per unit: $3.00
• Variable costs per unit: $0.90
• Total fixed costs: $225,000

Assuming the sales mix stays the same, what is the breakeven point for this company in units?

• Product A: 15,000; Product B: 22,500

• Product A: 16,000; Product B: 24,000

  Incorrect.

• Product A: 30,000; Product B: 45,000

  Correct!

• Product A: 40,000; Product B: 60,000

The correct answer is calculated as follows:

			Total
Sales	$66,000	$54,000	$120,000
Variable cost	(13,800)	(16,200)	(30,000)
Contribution margin	$52,200	$37,800	$90,000
Contribution margin ratio: 75%
Breakeven sales: $225,000/75.0% = $300,000
(With same sales mix)	A	B	Total
Breakeven sales	$165,000	$135,000	$300,000
Breakeven variable cost	(34,500)	(40,500)	(75,000)
Contribution margin	$130,500	$94,500	$225,000
Fixed cost			(225,000)
Profit			$0
Breakeven units	30,000	45,000

Alternate solution:

The sales mix is the relative proportion of total units sold (or total sales dollars) that is represented by each of a companys products. In this problem, the sales mix ratio is 2:3 (12,000:18,000). Therefore, a basket containing these number of products would have a sales price of (2 $5.50) + (3 $3.00) = $20.00 and a variable cost of (2 $1.15) + (3 $0.90) = $5.00. Hence, the breakeven calculation would be like this:

$20x $5x $225,000 = 0

$15x = $225,000

x = 15,000 baskets

Recall that each basket contains two units of Product A and three units of Product B. Therefore, using the mix ratio, you know that Mowing Motors needs to sell 30,000 units of Product A and 45,000 units of Product B.