Question

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:

	M			N			O
Unit sales price	$	9		$	7		$	8
Unit variable costs		5			4			7

Total fixed costs are $340,000. The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:

Multiple Choice

• $24.00.

• $ 8.00.

• $26.00.

• $50.00.

• $34.00.

  A company manufactures and sells a product for $50 per unit. The company's fixed costs are $168,000, and its variable costs are $15 per unit. The company's break-even point in sales dollars is: (Round your intermediate calculations to two decimal places.)

  Multiple Choice

• $230,500.

• $168,000.

• $4,800.

• $240,000.

• $183,500.
  

  A firm sells two products, Regular and Ultra. For every unit of Regular sold, two units of Ultra are sold. The firm's total fixed costs are $1,536,000. Selling prices and cost information for both products follow. What is the firm's break-even point in units of Regular and Ultra?
  

  Product	Unit Sales Price					Variable Cost Per Unit
  Regular		$	22				$	8
  Ultra			25					8

  Multiple Choice

• 32,000 Regular units and 32,000 Ultra units.

• 32,000 Regular units and 64,000 Ultra units.

• 10,667 Regular units and 21,333 Ultra units.

• 37,333 Regular units and 74,667 Ultra units.

• 64,000 Regular units and 32,000 Ultra units.

Answer 1

1.

Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. the selling price per unit is given as follows: M = $ 9 , N= $ 7 and O = $ 8.

Here the Composite saling price means the selling price of each units combined in the proportion given so , the sales per unit = Selling price * weights

Thus for M = $9 * 3 = $ 27. , For N = $ 7 * 1 = $ 7 and For O = $ 8 * 2 = $ 16 ,

So the selling price per composite unit for the current sales mix = $ 50 ( 27 + 7 +16 ).

Thus the correct options is ---------D i.e $ 50.

2.

Selling price per unit = $50 , and fixed cost = $ 168000 , and variable cost given = $ 15 per unit,

So Contribution margin per unit = selling price - variable cost = $ 50- $ 15 = $ 35.

Here Contribution Margin % = Contribution / Sales = $ 35 / 50 = 70%

So the Break even points in sales dollars = Fixed Cost / Contribution % = $16800 / 70% = $ 240000.

Thus the correct options is ---------D i.e $ 240,000

3.

Here the total fixed cost is given and no seperate allocation basis of fixed cost is given so direct breakeven calculation of two products are not posiible:

In order to calculate the break even we need to get the break even of the combined products then divide it on the basis of 1:2 as given,

A) For Regular : sales per unit = $ 22 and variable cost per unit = $ 8 , thus the contribution margin per unit = Sales - variable cost -= $ 22 - $8 = $ 14..

B) Since for 1 unit of regular ultra has 2 units of sales, thus the sales = $ 25*2 = $ 50, and variable cost = $ 8*2 = $ 16, so the contribution margin per unit = $ 34 ( 50- 16).

We have combined data of 1 regular and 2 ultra product as follows: Sales = $ 72 ( 22+50) , variable cost = $ 24 ( 8 + 16) and contribution margin per unit = $ 48 ( 14 + 34).

So for the company the break even sales in units = Fixed cost / Contribution margin per units combined.

Company break even sales in units = $ 1536000 / 48 = 32000 units .

Deviding this in 1 :2 for regular and Ultra = For regular = 10667 units and for Ultra = 21333 units.

Thus the correct option ------- C i.e 10,667 Regular units and 21,333 Ultra units.