Patriot Co. manufactures and sells three products: red, white, and blue. Their u
ID: 2595231 • Letter: P
Question
Patriot Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $60; white, $90; and blue, $115. The per unit variable costs to manufacture and sell these products are red, $45; white, $65; and blue, $85. Their sales mix is reflected in a ratio of 4:5:2 (red:white:blue). Annual fixed costs shared by all three products are $155,000. 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 $15; white, by $25; and blue, by $15. However, the new material requires new equipment, which will increase annual fixed costs by $25,000.
Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product.
Patriot Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $60; white, $90; and blue, $115. The per unit variable costs to manufacture and sell these products are red, $45; white, $65; and blue, $85. Their sales mix is reflected in a ratio of 4:5:2 (red:white:blue). Annual fixed costs shared by all three products are $155,000. 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 $15; white, by $25; and blue, by $15. However, the new material requires new equipment, which will increase annual fixed costs by $25,000.
Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product.
2. Determine its break-even point in both sales units and sales dollars of each individual product. e the selling price per composite unit. Ratio Selling price per unit Total per composite unit 15.00 25.00 15.00 80.00 125.00 30.00 Red White 215.00 e the variable costs per composite unit. Ratio Variable cost per unit Total per composite unit 80.00 125.00 30.00 Red 15.00 25.00 15.00 White 215.00 e the break-even point in composite units. Choose Denominator: Break even units Total fixed costs Break even units 25000I e its break-even point in units and sales dollars of each individual product. 245.00 XE 102 composite units Number of composite units to break even. Units sales at the break-even Dollar sales at the break-even per 105 155 200 Red White 400
Explanation / Answer
Determine the selling price per composite unit Ratio Selling price per unit Total per composite unit Red 4 60 240 White 5 90 450 Blue 2 115 230 920 Determine the variable costs per composite unit Ratio Variable cost per unit Total per composite unit Red 4 30 120 White 5 40 200 Blue 2 70 140 460 Determine the break-even point in composite units Choose Numerator: / Choose Denominator: = Break-even units Total fixed costs / Contribution margin per unit = Break-even units 180000 / 460 = 391.30 composite units Determine its break-even point in units and sales dollars of each individual product Number per composite unit Number of composite units to break even Unit sales at the break-even point Dollar sales at the break-even point Red 4 391.30 1565.20 93912 White 5 391.30 1956.50 176085 Blue 2 391.30 782.60 89999