0.00 points Problem 21-7A Break-even analysis with composlite unlts LO P4 Patrio

Question

0.00 points Problem 21-7A Break-even analysis with composlite unlts LO P4 Patriot Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $55, white, $85, and blue, $110. The per unit variable costs to manufacture and sell these products are red, $40, white, $60, and blue, $80. Their sales mix is reflected in a ratio of 5.4:2 (red white:blue) Annual fixed costs shared by all three products are $150,000. One type of raw material has been used to manufacture all three products. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: red, by $10, white, by $20, and blue, by $10. However, the new material requires new equipment, which will increase annual fixed costs by $20,000. Required: 1. Assume if the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product 1. Determine its break-even point in both sales units and sales dollars of each individual product te unit. Selling price per unit the selling price per c Ratio Total per composite unit Red White Blue 2 Determine the variable costs per composite unit. Ratio Variable cost per unit Total per composite unit Red White Blue SAMSU

Explanation / Answer

1) Break even point old Method

   Red White Blue

Selling Price $55 $85 $110

Variable cost $40 $60 $80

Contribution Margin $15 $25 $30

Let the total no. of units sold - N

that means as per the ratiof of sales = Red : 5N/11 White : 4N/11 Blue : 2N/11

so Breakeven point is achived where Contrinution Margin = Fixed Cost

So equation goes Like this

5N X $15 + 4N X $25 + 2N X $30 = $150,000

-------------------------------------------------

11

75N + 100N + 60N = $ 150,000 X 11

235 N =$ 1,650,000

N = $1,650,000/ 235

N = 7022 approx

So Sales of Unit Per Unit seling price Dollor Sale

Red = 5 X 7022 /11 = 3191 units $55 $ 175,505

White = 4 X 7022 /11 = 2553 Units $85 $ 217,005

Blue = 2 X 7022/11 = 1277 units $110 $ 140,470

Similary we can do 2nd part with fixed cost increase by 20,000 will make Fixed cost 170,000

And Variable cost Red = $30 White = $35 Blue = $70

and selling price and other things remain same.

Related Questions

Navigate

• Browse (All)
• Browse
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.