Patriot Co. manufactures and sells three products: red, white, and blue. Their u

Question

Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $53; white, $83; and blue, $108. The per unit variable costs to manufacture and sell these products are red, S38; white, $58; and blue, $78. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $148,000. 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 $12; white, by $22; and blue, by $12. However, the new material requires new equipment, which will increase annual fixed costs by $18,000 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. (Round composite units up to next whole number.) 1. Determine its break-even point in both sales units and sales dollars of each individual product. ine the sellin r composite unit. Ratio Selling price per unit Total per composite unit 5 S Red White Blue 53.00 83.00 108.00 265.00 332.00 216.00 813.00 ine the variable costs per composite unit. Ratio Variable cost per unit Total per composite unit Red White Blue 38.00 58.00 78.00 190.00 232.00 156.00 578.00 ine the break-even point in composite unit. Choose Numerator Choose Denominator: Break Even Units Total fixed costs Contribution margin per unit Break even units

Explanation / Answer

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Selling Price per Composit Unit $             813 Less:Variable cost per composit Unit$             578 Contribution per composit unit $             235 Fixed Cost $       148,000 Composit Break even point = Fixed cost/ composit contribution per unit             630 ($148,000/$235) Break even sales mix in the ratio of 5:4:2 Units Red = 630*5 =          3,150 White= 630*4 =          2,520 Blue=630*2 =          1,260 Break even sales in dollar = BEP units * Sales price per unit $ Red = 3150 units *$53=       166,950 White =2520 units*$83=       209,160 Blue = 1260units *$108 =       136,080 Total Break even sales       512,190

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