Question

Need help with the accounting problem.

Problem 21-7A 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, $53; white, $83; and blue, $108. The per unit variable costs to manufacture and sell these products are red, $38; 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.

Answer 1

1) 1. Determine its break-even point in both sales units and sales dollars of each individual product. Determine the selling price per composite unit Selling Total per Ratio Price per composite unit unit Red $53 $265 White $83 $332 Blue 2 S108 $216 $813 Determine the variable costs per composite unit. Variable Total per Ratio cost per composite unit unit Red $38 $190 White $58 S232 Blue $78 $156 $578 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 $148,000 I $235 630 composite units Determine its break-even point in units and sales dollars of each individual product. Number Units Number of Dollar sales at per composite sales at thebreak- composite units to thebreak- even unit break point even point even. Red 630 3,150 $166,950 White 630 2,520 $209.160 630 1,260 $136,080 Blue 2) 1. Determine its break-even point in both sales units and sales dollars of each individual product. Determine the selling price per composite unit Selling Total per Ratio Price per composite unit unit Red $53 $265 White $83 $332 Blue 2 S108 $216 $813 Determine the variable costs per composite unit. Variable Total per Ratio cost per unit unit Red $26 $130 White $144 Blue $66 $132 $406 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 $166,000 / S407 408 composite units composite $36 Determine its break-even point in units and sales dollars of each individual product. Number Units Number of Dollar sales at per composite sales at thebreak- composite units to thebreak- even unit break even point point even. Red 408 2,040 $108.120 408 1.632 $135,456 Blue 2 408 816 $88.128 White