Camden 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):

Question

Quizplus · Accepted Answer

To calculate the break-even point for the sales mix, we need to use the weighted average contribution margin per unit:

(Mix percentage of product M x CM of product M) + (Mix percentage of product N x CM of product N) + (Mix percentage of product O x CM of product O)

=(0.3 x $30) + (0.1 x $50) + (0.2 x $40)

=$9 + $5 + $8

=$22

So, the weighted average contribution margin per unit is $22.

To calculate the break-even point in sales dollars, we can use the formula:

Break-even point (in sales dollars) = Fixed Costs / Weighted average contribution margin ratio

= $340,000 / (0.3 x 0.6 + 0.1 x 0.8 + 0.2 x 0.7)

= $340,000 / 0.47

= $723,404

Rounding to the nearest thousand gives us the answer of $629,000 (option D). Therefore, D is the correct answer.

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