Patriot Co. manufactures and sells three products: red, white, and blue. Their u
ID: 2469479 • Letter: P
Question
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 are red, $12; white, $22; and blue, $50. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $250,000. 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 $6; white, by $12; and blue, by $10. However, the new material requires new equipment, which will increase annual fixed costs by $50,000.
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 are red, $12; white, $22; and blue, $50. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $250,000. 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 $6; white, by $12; and blue, by $10. However, the new material requires new equipment, which will increase annual fixed costs by $50,000.
Explanation / Answer
Ans 1 Determine the selling price Ratio Selling Price per unit Total per composite unit Red 5 $20 100.00 White 4 35 140.00 Blue 2 65 130.00 Total 120 370 Determine the variable cost Ratio Variable cost per unit Total per composite unit Red 5 12 60.00 White 4 22 88.00 Blue 2 50 100.00 Total 84 248 Break even point in units Break even units 250000 122 2049.18 2050 rounded off No. per composite Unit No.of composite units to break even N Unit sales at break even N/Total* 5/4/2 repectively Selling Price per unit $ sales at break even Red 5 2050 932 20 18636 White 4 2050 745 35 26091 Blue 2 2050 373 65 24227 Total 11 120 Ans 2 Determine the selling price Ratio Selling Price per unit Total per composite unit Red 5 20 100.00 White 4 35 140.00 Blue 2 65 130.00 Total 120 370 Determine the variable cost Ratio Variable cost per unit Total per composite unit Red 5 6 30.00 White 4 10 40.00 Blue 2 40 80.00 Total 56 150 Break even point in units Break even units 300000 220 1363.636 1364 rounded off No. per composite Unit No.of composite units to break even N Unit sales at break even N/Total* 5/4/2 repectively Selling Price per unit $ sales at break even Red* 5 1364 620 20 12400 White 4 1364 496 35 17360 Blue 2 1364 248 65 16120 Total 11 120 Red* 1364/11*5 620