Question

National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $56; white, $86; and blue, $111. The per unit variable costs to manufacture and sell these products are red, $41; white, $61; and blue, $81. Their sales mix is reflected in a ratio of 2:2:1 (red:white:blue). Annual fixed costs shared by all three products are $151,000. 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 $11; white, by $21; and blue, by $11. However, the new material requires new equipment, which will increase annual fixed costs by $21,000.

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.)

Break-Even Points	Sales Units	Sales Dollars
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 "$" sign in your response.)

Break-Even Points	Sales Units	Sales Dollars
Red at break-even		$
White at break-even		$
Blue at break-even		$

Answer 1

with old material

	2	2	1
	red	white	blue
sale	56	86	111
variable cost	41	61	81
fixed cost	60400	60400	30200
total fixed cost is 151000(split in 2:2:1)
contribution margin	15	25	30
fixed cost	60400	60400	30200
Units that are required to be manufactured for covering the fixed cost	4,027	2,416	1,007
Sales in $	225,493	207,776	111,740

with new material

	2	2	1
	red	white	blue
sale	56	86	111
variable cost	11	21	11
fixed cost	68800	68800	34400
172000
contribution margin	45	65	100
fixed cost	68800	68800	34400
Units that are required to be manufactured for covering the fixed cost	1,529	1,058	344
Sales in $	85,618	91,028	38,184