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Respected Sir, plz explain this Question’s Answer…..
A Co makes two products, nail polish and lipsticks.
Nail polish sales make up 30% of total sales and their variable costs are 45% as a percentage
of sales value.Lipsticks sales are 70% of the total sales and their variable costs are 40% as a percentage of
sales value.Total fixed costs are $400,000 for the company.
Required:
What is break-even level of sales revenues for the company?Have you watched the free lectures on CVP?
You can calculate the CS ratios for each of the two products ( A 55% and B 60%).
So you then calculate the average CS ratio.Then, as always, breakeven sales revenue is equal to the fixed overheads divided by the average CS ratio.
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