Question

National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $47, white, $77, and blue, $102. The per unit variable costs to manufacture and sell these products are red, $32, white, $52, and blue, $72. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $142,000. 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 $7, white, by $17; and blue, by $7. However, the new material requires new equipment, which will increase annual fixed costs by $12,000. Required: 1. Assume if the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product. (Round up your composite units to whole number. Omit the "$" sign in your response.) Sales Units Sales Dollars Break-Even Points Red at break-even White at break-even Blue at break-even 2. 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. (Round up your composite units to whole number. Omit the "S" sign in your response.) Sales Units Sales Dollars Break-Even Points Red at break-even White at break-even Blue at break-even

Answer 1

National Co. Requirement 1 Selling Price Ratio Selling Price Per unit Total per Composite Unit Red 5 47 235 White 308 4 77 Blue 102 2 204 747 Variable Cost per unit Variable Cost per unit Total per Composite Unit Ratio Red 160 5 32 White 4 52 208 Blue 144 2 72 512 Breakeven Point Break even Units Fixed Cost / Contribution per unit = 142000 (747-512) 604 Units Number per Units Sales at Dollars at the Breakeven point Breakevent point Composite Unit Breakeven units Red 5 604 3020 141940 White 604 2416 186032 123216 Blue 2. 604 1208 Requirement 2 Selling Price Ratio Selling Price Per unit Total per Composite Unit Red 5 47 235 White 77 308 Blue 102 2. 204 747 Variable Cost per unit Variable Cost per unit Total per Composite Unit Ratio Red 5 7 35 White 4 17 68 Blue 2. 7 14 117 630 Breakeven Point Break even Units Fixed Cost / Contribution per unit = 154000 (747-117) 244 Units Number per Units Sales at Dollars at the Breakeven point Breakevent point Composite Unit Breakeven units Red 5 244 1220 286700 White 244 976 300608 Blue 2. 244 488 99552