Mounts Corporation produces and sells two products. In the most recent month, Product I05L had sales of $32,000 and variable expenses of $10,880. Product P42T had sales of $45,000 and variable expenses of $18,380. And the fixed expenses of the entire company were $46,070. The break-even point in sales dollars for the entire company is closest to A. $75,330
B. $74,306
C. $30,930
D. $46,070

B. $74,306

Explanation:

First, we need to calculate contribution margin for both.

Product 105L

Sales $32,000

Less variable expenses ($10,880)

Contribution margin $21,120

Contribution margin ratio = Contribution margin ÷ Sales

= $21,120 ÷ $32,000

= 66%

Product P42T

Sales $45,000

Less variable expenses ($18,380)

Contribution margin $26,620

Contribution margin ratio = Contribution margin ÷ Sales

= $26,620 ÷ $45,000

= 59.2%

Total sales for both products $77,000

Less Total variable expenses ($29,260)

Total contribution margin $47,740

Total contribution margin ratio $47,740 ÷ $77,000 = 62%

Fixed expenses for both companies = $46,070

Therefore,

Break even point in sales for both companies = Total fixed expenses ÷ Contribution margin ratio

= $46,070 ÷ 62%

= $74,306.45