Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$
Total fixed costs are $340,000.
-The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:

Question

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are: $\begin{array}{lrrrr}
&\text {M}&\text {N}&\text {O}\
\text { Unit sales price } & \$ 7 & \$ 4 & \$ 6 \
\text { Unit variable costs } & 3 & 2 & 3
\end{array}$
 Total fixed costs are $340,000. 
-The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:

Quizplus · Accepted Answer

First, we need to calculate the weighted average unit price for the three products using the sales mix ratio:

M: 3/6 = 0.5
N: 1/6 = 0.1667
O: 2/6 = 0.3333

Weighted average unit price = (11 * 0.5) + (15 * 0.1667) + (20 * 0.3333) = $14.67

Next, we can calculate the contribution margin per composite unit by subtracting the variable cost per composite unit from the weighted average unit price:

Contribution margin per composite unit = $14.67 - $9 = $5.67

Finally, we can use the contribution margin per composite unit and the total fixed costs to calculate the breakeven point in composite units:

Breakeven point in composite units = $340,000 / $5.67 = 60,042 units

Since the sales mix ratio is 3:1:2, we can calculate the number of composite units sold for each product:

M: 3/6 * 60,042 = 30,021 units
N: 1/6 * 60,042 = 10,007 units
O: 2/6 * 60,042 = 20,014 units

The total revenue for each product can be calculated by multiplying the unit price by the number of units sold:

M: 30,021 * $11 = $330,231
N: 10,007 * $15 = $150,105
O: 20,014 * $20 = $400,280

The total revenue for all products is $880,616. Dividing this by the total number of composite units sold (60,042) gives us the selling price per composite unit:

Selling price per composite unit = $880,616 / 60,042 = $14.66, rounded to the nearest cent

Therefore, the answer is B) $37.00.

Madison Corporation Sells Three Products (M, N, and O) in the Following