Question 3:

Blue Chance Co. sells computers and video game systems. The business is divided into two divisions along product lines. Variable costing income statements for the current year are presented below:

Computers Division VG Systems Division Total

Sales $700,000 $300,000 $1,000,000

Variable costs 420,000 210,000 630,000

Contribution margin $280,000 $ 90,000 370,000

Fixed costs 296,000

Net income $ 74,000

Instructions

(a) Determine the sales mix and contribution margin ratio for each division.

(b) Calculate the companys weighted-average contribution margin ratio.

(c) Calculate the companys break-even point in dollars.

(d) Determine the sales level, in dollars, for each division at the break-even point.