Question

Help Save & Exit Submit Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $52, white, $82; and blue, $107. The per unit variable costs to manufacture and sell these products are red, $37; white, $57; and blue. $77. Their sales mix is reflected in a ratio of 2:2:1 (red:white:blue). Annual fixed costs shared by all three products are $147.000. 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 $13; white, by $23; and blue, by $13. However, the new material requires new equipment, which will increase annual fixed costs by $17,000 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 Blue 1 Determine the variable costs per composite unit. Ratio Variable cost per unit Red Total per composite unit White Determine the break-even point in composite unit. Choose Numerator: Choose Denominator: Break Even Units Break even units Prev 1 of 6 !!! Next >

Answer 1

*****Assumed that the company that the company continues to use the old material.

Break Even Point

in Sales Units = Fixed Cost/Contribution per Unit

1. Red = 58800/(52-37) = 3,920 Units

2. White = 58800/(82-57) = 2,352 Units

3. Blue = 29400/(107-77) = 980 Units

in Sales Dollar = Fixed Cost/Contribution Margin (***Contribution margin = (Selling price-Variable cost)/Selling Price

1. Red = 58800/[(52-37)/52] = 2,03,840 /-

2. White = 58800/[(82-57)/82] = 1,92,864/-

3.Blue = 29400/[(107-77)/107] = 1,04,860/-

*Selling price per Composite Unit Calculation

SELLING PRICE PER COMPOSITE UNIT
Product	Ratio	Selling price per unit	Total per composite unit
Red	2	52	96
White	2	82	96
Blue	1	107	48
Total	5	241	241

*Variable Cost per Composite Unit Calculation

Variable Cost per composite unit
Product	Ratio	Selling price per unit	Total per composite unit
Red	2	37	68
White	2	57	68
Blue	1	77	34
Total	5	171	171

Break Even Point in composite unit

in Sales Units = Fixed Cost/Contribution per Unit

1. Red = 58800/(96-68) = 2,100 Units

2. White = 58800/(96-68) = 2,100 Units

3. Blue = 29400/(48-34) = 2,100 Units

in Sales Dollar = Fixed Cost/Contribution Margin (***Contribution margin = (Selling price-Variable cost)/Selling Price

1. Red = 58800/[(96-68)/96] = 2,01,600 /-

2. White = 58800/[(96-68)/96] = 2,01,600/-

3.Blue = 29400/[(48-34)/48] = 1,00,800/-

*****Assumed that the company that the company continues to use the new material.

Break Even Point

in Sales Units = Fixed Cost/Contribution per Unit

1. Red = 65600/(52-24) = 2,343 Units

2. White = 65600/(82-34) = 1,367 Units

3. Blue = 32800/(107-64) = 763 Units

in Sales Dollar = Fixed Cost/Contribution Margin (***Contribution margin = (Selling price-Variable cost)/Selling Price

1. Red = 65600/[(52-24)/52] = 1,21,829 /-

2. White = 65600/[(82-34)/82] = 1,12,067/-

3.Blue = 32800/[(107-64)/107] = 81,619/-

*Selling price per Composite Unit Calculation

SELLING PRICE PER COMPOSITE UNIT
Product	Ratio	Selling price per unit	Total per composite unit
Red	2	52	96
White	2	82	96
Blue	1	107	48
Total	5	241	241

*Variable Cost per Composite Unit Calculation

Variable Cost per composite unit
Product	Ratio	Selling price per unit	Total per composite unit
Red	2	24	49
White	2	34	49
Blue	1	64	24
Total	5	122	122

Break Even Point in composite unit

in Sales Units = Fixed Cost/Contribution per Unit

1. Red = 65600/(96-49) = 1,396 Units

2. White = 65600/(96-49) = 1,396 Units

3. Blue = 32800/(48-24) = 1,367 Units

in Sales Dollar = Fixed Cost/Contribution Margin (***Contribution margin = (Selling price-Variable cost)/Selling Price

1. Red = 65600/[(96-49)/96] = 1,33,992 /-

2. White = 65600/[(96-49)/96] = 1,33,992/-

3.Blue = 32800/[(48-24)/48] = 65,600/-