Asked by Ryan Matthew McCarthy on Jul 04, 2024

verifed

Verified

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) :

A) $20,000.
B) $289,000.
C) $400,000.
D) $629,000.
E) $740,000.

Break-Even Point

The level of sales at which total revenues equal total expenses, resulting in no profit or loss for the business.

  • Evaluate the junctures at which expenses and income balance out in units and monetary values, for both unique and assorted product scenarios.
  • Acquire knowledge about sales mix and its role in break-even analysis.
verifed

Verified Answer

ZK
Zybrea KnightJul 07, 2024
Final Answer :
D
Explanation :
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.