Question

Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $st 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 452 fred white bluej 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 Blue Determine the variable costs per composite unit. Ratio Variable cost per unit Total per composite unit Red White Blue Determine the break-even point in composite unit. Choose Numerator: Choose Denominator Break Even Units Break even units Determine its break-even point in units and sales dollars of each individual product. Number Units sales at the Dollar sales at the por Number of composite units to

Answer 1

1
Determine the selling price per composite unit.
	Ratio	Selling price per unit		Total per composite unit
Red	4	51		204
White	5	81		405
Blue	2	106		212
				821
Determine the variable costs per composite unit.
	Ratio	Variable cost per unit		Total per composite unit
Red	4	36		144
White	5	56		280
Blue	2	76		152
				576
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
146000	/	245	=	596
	Number per composite unit	Number of composite units to break even	Units sales at the break-even point	Dollar sales at the break-even point
Red	4	596	2384	121584
White	5	596	2980	241380
Blue	2	596	1192	126352
2
Determine the selling price per composite unit.
	Ratio	Selling price per unit		Total per composite unit
Red	4	51		204
White	5	81		405
Blue	2	106		212
				821
Determine the variable costs per composite unit.
	Ratio	Variable cost per unit		Total per composite unit
Red	4	22		88
White	5	32		160
Blue	2	62		124
				372
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
162000	/	449	=	361
	Number per composite unit	Number of composite units to break even	Units sales at the break-even point	Dollar sales at the break-even point
Red	4	361	1444	73644
White	5	361	1805	146205
Blue	2	361	722	76532