Madison Corporation sells three products M N and O in the fo

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:

Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: Unit sales price Unit variable costs $7$ 46 3 2 Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is (round to the nearest thousand) O $740,000. O $20,000. O $289,000. $629,000. O $400,000.

Solution

Break-Even Point in sales Dollar = $629,000

Calculations

Total Selling Price

3 Units at $7

$21.00

1 Unit at $4

$4.00

2 Units at $6

$12.00

Total Selling Price

$37.00

Total Contribution per unit

3 Units x [ $7 – 3 ]

$12.00

1 Unit x [ $4 – 2 ]

$2.00

2 Units x [ $6 – 3 ]

$6.00

Total Contribution per unit

$20.00

Contribution Ratio = [ Contribution / Sales ] x 100

= [ $20.00 / 37.00 ] x 100

= 54.05%

Break-Even Point in sales Dollar = Fixed Costs / Contribution Ratio

= $340,000 / 0.5405

= $629,000

3 Units at $7	$21.00
1 Unit at $4	$4.00
2 Units at $6	$12.00
Total Selling Price	$37.00