Camden Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are:
$\begin{array}{llr}
&\mathrm{M} & \mathrm{N} & \mathrm{O}\
\text { Unit sales price} &\$7&\$4&\$6\
\text { Unit variable costs } &3&2&3
\end{array}$

Total fixed costs are $340,000.The break-even point in sales dollars for the current sales mix is:
A) $20,000
B) $289,000
C) $400,000
D) $629,000
E) $740,000

Question

Camden Corporation sells three products (M,N,and O)in the following mix: 3:1:2.Unit price and cost data are:
$\begin{array}{llr}
&\mathrm{M} & \mathrm{N} & \mathrm{O}\ 
 \text {  Unit sales price} &\$7&\$4&\$6\
 \text { Unit variable costs } &3&2&3
\end{array}$

Total fixed costs are $340,000.The break-even point in sales dollars for the current sales mix is:
A) $20,000
B) $289,000
C) $400,000
D) $629,000
E) $740,000

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: $97,143 \times (7 \times 0.5 + 4 \times 0.1667 + 6 \times 0.3333) = $629,000$.

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