Mad city flash sells computers and video game systems the...

Mad City Flash 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 VG Systems Total Sales $800,000 $200,000 $1,000,000 Variable costs $480,000 $140,000 $620,000 Contribution margin $320,000 $60,000 $380,000 Fixed costs $228,000 Net income $152,000 Instructions (show calculations): 1. Determine the sales mix and contribution margin ratio for each division. 2. Calculate the company's weighted-average contribution margin ratio. 3. Calculate the company's break-even point in dollars. 4. Determine the sales level, in dollars, for each division at the break-even point.

Transcript

00:02 Hello, in this video, we are given the income statement of mad city flesh company, and they have two business divisions, namely the computer division and video division.

00:15 So we're going to compute for the sales mix, the cmr contribution margin ratio, the weighted average contribution margin ratio, the break -even point on dollars, and lastly the sales level.

00:36 So let us begin with their sales mix.

00:43 So in order to compute for your sales mix, that's very simple.

00:48 You just need to divide your sales or the sales of a specific division divided by the total sales.

01:02 So for the first division, you have the computer division.

01:06 They have a sales of 800 ,000.

01:11 While the video division, they have a sales of 200 ,000.

01:16 Okay, so sales is 800 ,000.

01:20 Total sales is 800 plus 200.

01:24 That's plus 200 ,000.

01:26 That's $1 million.

01:32 So that's 80%.

01:34 And same thing goes for the video division.

01:38 $200.

01:40 $200 ,000 divided by 1 million.

01:48 That's 20%.

01:50 So you will input here for computer division, 80%, and for video division, that's 20%.

02:02 So next let us compute for the contribution margin ratio.

02:07 For your cmr, to compute for your cmr, that's contribution margin, divided by your total sales okay for the video or i'm sorry for the computer division you have a contribution margin of 320 ,000 how did we get that that's 800 ,000 total sales minus your variable cost of 480 ,000 so that's 320 ,000 divided by your total sales i'm sorry it's not total sales but just the sales of that specific division okay so for computer division you have a sales of 800 ,000 so 320 divided by 800 and you will get 40 % now for the video division you have a contribution margin of 60 ,000, which is 200 ,000 minus 140 ,000 variable cost that 60 ,000.

03:56 Divided by the sales of that division, which is 200 ,000.

04:03 And so 60 divided by 200, you will get 30%.

04:11 So for the contribution margin ratio, we have 40 % for computer division.

04:19 And 30 % for video division.

04:22 Now let us proceed with the weighted contribution margin ratio.

04:31 So for the weighted contribution margin ratio, how do you compute for that? that's contribution margin times sales mix, okay? plus contribution margin plus sales mix of the other day.

05:04 Division.

05:06 So this is division one and this is division two.

05:11 Divided by the total sales...

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