Question

  

National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $65; white, $95; and blue, $120. The per unit variable costs to manufacture and sell these products are red, $50; white, $70; and blue, $90. Their sales mix is reflected in a ratio of 2:2:1 (red:white:blue). Annual fixed costs shared by all three products are $160,000. 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 $30,000.

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