Question

Patriot Co., manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $51; white, $81; and blue, $106. The per unit variable costs to manufacture and sell these products are red, $36; white. $56; and blue, $76. Their sales mix is reflected in a ratio of 4:5:2 (red:white:blue). Annual fixed costs shared by all three products are $146,000. 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 $14; white, by $24; and blue, by $14. However, the new material requires new equipment, which will increase annual fixed costs by $16,000. 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 Determine the selling price per composite unit. Ratio Selling price per unit Total per composite unit Red White Determine the variable costs per composite unit. Ratio Variable cost per unit Total per composite unit Determine the break-even point in composite unit Choose Numerator Choose Denominator: Break Even Units Raven units

Answer 1

The answer is attched in below picture. Please refer

Thanks

2. USING OLD MATERIAL Total per Composite Unit [(Selling Price Per Unit* Ratio/Ratio Total Selling Price Per Sales Ratio Unit Red 51.00 $ 81.00 $ 4 S 18.55 White 36.82 Blue 2S 106.00 S 19.27 11 $ Total 74.64 Total per Composite Unit [(Selling Price Per Unit* Ratio)/ Ratio Total] Selling Price Per Variable Cost Ratio Unit 36.00 $ Red 4 S 13.09 56.00 $ 5 $ White 25.45 76.00 $ Blue 2S 13.82 $ 52.36 Total 11 Contribution margin ratio = (Contribution /Sale price) Particlualrs Contribution Variable Cost Sale Price 100 18.55 $ 13.09 $ 25.45 $ 13.82 $ 29.41% $ 36.82 $ Red 5.45 30.86% 28.30% $ 19.27 $ White 11.36 Blue 5.45 Formula for Break Even Point for Units = Fixed Cost / Contribution per Unit Denominator Numerator (Contribution per (Fixed Cost) Unit) Particulars BEP Units 26,767 12,848 Red $ 146,000 $ 5.45 146,000 $ 146,000 $ $ White 11.36 $ Blue 26,767 5.45

Formula for Break Even Point for Dollar = Fixed Cost/ Contribution margin ratio Denominator (Contribution (Fixed Cost) margin ratio) Particulars Numerator BEP Units 496,400 Red $ 29.41% 146,000 $ White 146,000 30.86% 473,040 28.30% Blue $ 146,000 515,867 2. USING NEW MATERIAL Selling Price Per Unit Total per Composite Unit [(Selling Price Per Unit Ratio)/ Ratio Total] 51.00 $ Sales Ratio $ Red 18.55 81.00 $ White 36.82 2 S 106.00 S Blue 19.27 Total 74.64 11 Total per Composite Unit [(Selling Price Per Unit Ratio)/ Ratio Total] 22.00 $ 32.00 $ Selling Price Per Variable Cost Ratio Unit $ Red 8.00 5$ White 14.55 62.00 $ 2 S Blue 11.27 Total 11 $ 33.82 Contribution margin ratio Particlualrs (Contribution /Sale price) Variable Cost Contribution Sale Price *100 18.55 $ 36.82 $ 56.86% 8.00 $ 14.55 $ 11.27 $ $ Red 10.55 $ 19.27 $ White 60.49% 22.27 Blue 41.51% 8.00

Formula for Break Even Point for Units Fixed Cost/ Contribution per Unit Denominator Numerator (Contribution per (Fixed Cost) Unit) 162,000 $ 162,000 $ Particulars BEP Units Red $ 10.55 15,362 $ White 22.27 7,273 $ 162,000 $ Blue 8.00 20,250 Formula for Break Even Point for Dollar Fixed Cost Contribution margin ratio Denominator (Contribution Numerator (Fixed Cost) margin ratio) $ 162,000 Particulars BEP Units 56.86% 284,897 Red 60.49% 41.51% White 267,796 162,000 $ Blue 162,000 390,273