CMA Study Group

  • 1.  CMA Part 2 Doubt - Q 2. Breakeven point for multiple products

    Posted 05-10-2014 05:50 AM

    Hi, Can someone please help answer the below Q, by showing the workings.

     

          I-Chris Nutrition Company produces three distinct products as follows:

    Product                        Percentage of Total Sales in units                              Sale Price

    Quinoa Bars                                        50%                                                     $1

    Millet Cookies                                     30%                                                     $1

    Amaranth Pops                                   20%                                                     $2

     

    The contribution margin for the Quinoa Bars is 25% of sales. Millet Cookies and Amaranth Pops both have a 50% contribution margin. Calculate the breakeven point in sales dollars if I-Chris Nutrition's fixed costs are $675,000.

     

    a. $506,757.

    b. $675,000.

    c. $1,421,053.

    d. $1,800,000.

    Answer is: Option c.



    -------------------------------------------
    Neha
    Oman
    -------------------------------------------


  • 2.  RE:CMA Part 2 Doubt - Q 2. Breakeven point for multiple products

    Posted 05-10-2014 12:35 PM

    You need to calculate the weighted average contribution margin (WACM) for each product, then sum the total WACM for all products as follows:-

    Product                        Percentage of Total Sales in units                  Sale Price    WACM

    Quinoa Bars                                        50%                                          $1 ($1 x 50% x 25%) = 12.5%

    Millet Cookies                                     30%                                          $1 ($1 x 30% x 50%) = 15%

    Amaranth Pops                                   20%                                           $2 ($2 x 20% x 50%) = 20%

    total WACM =      = 47.5%
    the break even point in dollar = 675000/47.5% = c. $1,421,053

     

    -------------------------------------------
    Ashraf Aly Deyab
    Chief Financial Officer
    -------------------------------------------








  • 3.  RE:CMA Part 2 Doubt - Q 2. Breakeven point for multiple products

    Posted 05-10-2014 01:48 PM
    Again thank you soo much!

    -------------------------------------------
    Neha
    Oman
    -------------------------------------------






    Original Message