Kelly Co. incurs $465, 000 in fixed costs while producing three products with the following characteristics: $$\begin{array} { | l | c | c | c | }
\hline \text { Product } & \text { Sales Mix (units) } & \begin{array} { c }
\text { Contribution } \
\text { Mar gin per unit }
\end{array} & \begin{array} { c }
\text { Contribution } \
\text { Margin Ratin }
\end{array} \
\hline \text { Srnall } & 5 & \$ 300 & 25 \% \
\hline \text { Medium } & 3 & \$ 200 & 30 \% \
\hline \text { Larpe } & 2 & \$ 500 & 40 \% \
\hline
\end{array}$$ At the breakeven point, what is the dollar sales volume for Product Q?
A) $800,000
B) $360,000
C) $300, 000
D) $120,000

Question

Kelly Co. incurs $465, 000 in fixed costs while producing three products with the following characteristics: $$\begin{array} { | l | c | c | c | } 
\hline \text { Product } & \text { Sales Mix (units) } & \begin{array} { c } 
\text { Contribution } \
\text { Mar gin per unit }
\end{array} & \begin{array} { c } 
\text { Contribution } \
\text { Margin Ratin }
\end{array} \
\hline \text { Srnall } & 5 & \$ 300 & 25 \% \
\hline \text { Medium } & 3 & \$ 200 & 30 \% \
\hline \text { Larpe } & 2 & \$ 500 & 40 \% \
\hline
\end{array}$$ At the breakeven point, what is the dollar sales volume for Product Q?
A) $800,000
B) $360,000
C) $300, 000
D) $120,000

Quizplus · Accepted Answer

To find the breakeven sales volume, calculate the weighted average contribution margin ratio: (5/10 * 25%) + (3/10 * 30%) + (2/10 * 40%) = 30%. Then, divide the total fixed costs by this ratio: $465,000 / 30% = $1,550,000. The sales mix ratio for Product Q (Medium) is 3/10, so its sales volume is $1,550,000 * 3/10 = $465,000. However, the question asks for the dollar sales volume for Product Q, which is $300,000.

Kelly Co Incurs $465, 000 in Fixed Costs While Producing Three