#3: Madison Corporation sells three products (M, N, and O) in the following mix:
ID: 2539308 • Letter: #
Question
#3: 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
$
10
$
7
$
9
Unit variable costs
5
4
7
Total fixed costs are $561,000. The contribution margin per composite unit for the current sales mix (round to the nearest cent) is:
#8: Forrester Company is considering buying new equipment that would increase monthly fixed costs from $360,000 to $445,500 and would decrease the current variable costs of $60 by $15 per unit. The selling price of $100 is not expected to change. Forrester's current break-even sales are $900,000 and current break-even units are 9,000. If Forrester purchases this new equipment, the revised break-even point in dollars would be:
M
N
O
Unit sales price
$
10
$
7
$
9
Unit variable costs
5
4
7
Explanation / Answer
# 3. Contribution Margin per composite unit for the current sales mix is :
Total Contribution per unit = $ 10
Contribution Margin per composite unit = $ 561,000/ $10
= 56100 units
#8. Revised Break even point
Selling Price = $ 100
Variable Cost = $ 45
Contribution per unit = $ 55
Fixed Cost = $ 445,500
Break even point (units) = $ 445,500 / $ 55
= 8100 units
Break Even Point (in dollars) = $810,000
M N O Units Sales Price $ 10 $ 7 $ 9 Units Variable Costs $ 5 $ 4 $ 7 Contribution per Unit $ 5 $ 3 $ 2Related Questions
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