Exercise 4-34 Contribution Margin Ratio, Break-Even Sales Revenue,
and Margin of Safety for Multiple-Product Firm
Texas-Q Company produces and sells barbeque grills. Texas-Q sells three models: a small por-
table gas grill, a larger stationary gas grill, and the specialty smoker. In the coming year, Texas-Q
expects to sell 20,000 portable grills, 50,000 stationary grills, and 5,000 smokers. Information
on the three models is as follows:
Price Portable Stationary Smokers
Variable cost per unit $90 $200 $250
45 130 140
Total fixed cost is $2,128,500.
Required:
1. What is the sales mix of portable grills to stationary grills to smokers?
2. Compute the break-even quantity of each product.
3. Prepare an income statement for Texas-Q for the coming year. What is the overall contri-
bution margin ratio? The overall break-even sales revenue? (Note: Round the contribution
margin ratio to four decimal places; round the break-even sales revenue to the nearest
dollar.)
4. Compute the margin of safety for the coming year.
