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 break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

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 break-even point in sales dollars for the current sales mix is (round to the nearest thousand):

Quizplus · Accepted Answer

To find the break-even point in sales dollars, calculate the weighted average contribution margin per unit, then divide total fixed costs by this margin. The contribution margins are $4 for M, $2 for N, and $3 for O. The sales mix is 3:1:2, so the weighted average contribution margin is $(3/6 \times 4) + (1/6 \times 2) + (2/6 \times 3) = 3.5$. The break-even point is $340,000 / 3.5 = $97,143 in units. Convert to sales dollars using the average sales price per unit: $(3/6 \times 7) + (1/6 \times 4) + (2/6 \times 6) = 6.48$. Thus, $97,143 \times 6.48 = $629,000.

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