HW Chapter 18 12 Problem 18-7A Break-even analysis with composite units LO P4 Pa
ID: 2539253 • Letter: H
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HW Chapter 18 12 Problem 18-7A Break-even analysis with composite units LO P4 Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $20: white, $35; and blue. $65. The per unit variable costs to manufacture and sell these products arer reflected in a ratio of 5:4:2 (red white blue). Annual fixed costs shared by all three pr been used to manufacture all three products. The company has material would reduce variable costs per unit as follows: red, by $6; white, by $12; and blue, by $10. However, the new material requires new equipment, which will increase annual fixed costs by $50,000. 25 ed, $12 white, $22: and blue, $50. Their sales mix is for less cost. The new oducts are $250,000. One type of raw material has developed a new material of equal quality References Required: 1. Assume f the company continues to use the old material, determine its break even point in both sales units and sales dollars of each individual product. (Round composite units up to next whole number.) 20 00 35 00 65.00 100 00 140.00 130 00 370.00 6000 88 00 100 00 12 00 22 00Explanation / Answer
As per old material Selling Price per Composit Unit Ratio Selling Price Per Unit Total Per Composite Unit Red 5 20 100 White 4 35 140 Blue 2 65 130 370 Variable cost per composite unit Red 5 12 60 White 4 22 88 Blue 2 50 100 248 Profit Per unit 122 Fixed Cost 250000 No of Units to recover Fixed cost 2050 Product Ratio Brreak even in no of Units for each product Brreak even in Dollars for each product Red 5 10250 205,000 White 4 8200 287,000 Blue 2 4100 266,500 Total 758,500 As per new material Selling Price per Composit Unit Ratio Selling Price Per Unit Total Per Composite Unit Red 5 20 100 White 4 35 140 Blue 2 65 130 370 Variable cost per composite unit Red 5 6 30 White 4 10 40 Blue 2 40 80 150 Profit Per unit 220 Fixed Cost 300000 No of Units to recover Fixed cost 1364 Product Ratio Brreak even in no of Units for each product Brreak even in Dollars for each product Red 5 6820 136,400 White 4 5456 190,960 Blue 2 2728 177,320 Total 504,680
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