Question
In: Accounting
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each...
Multiple-Product Breakeven
Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $30,000. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year:
| Vases | Figurines | ||
| Price | $40 | $70 | |
| Variable cost | 30 | 42 | |
| Contribution margin | $10 | $28 | |
| Number of units | 1,000 | 500 |
Required:
1. Compute the number of vases and the number of figurines that must be sold for the company to break even.
| Break-even vases | units |
| Break-even figurines | units |
2. Parker Pottery is considering upgrading its factory to improve the quality of its products. The upgrade will add $5,260 per year to total fixed cost. If the upgrade is successful, the projected sales of vases will be 1,500, and figurine sales will increase to 1,000 units. What is the new break-even point in units for each of the products?
| Break-even vases | units |
| Break-even figurines | units |
Solutions
Expert Solution
Unit sales to break-even=Fixed expenses/unit contribution margin
1.Calculation of number of vases that must be sold for the company to break-even:
Unit sales to break-even=($30,000/$48)*2
Unit sales to break-even=1,250 vases
Calculation of number of figurines that must be sold for the company to break-even:
Unit sales to break-even=$30,000/48
Unit sales to break-even=625 figurines
Working note:
The number of vases sold are 1000 and number of figurines sold are 600 so the sales mix would be 2:1.
2.
Calculation of number of vases that must be sold for the company to break-even:
Unit sales to break-even=(($30,000+$5,260)/$86)*3
Unit sales to break-even=1,230 vases
Calculation of number of figurines that must be sold for the company to break-even:
Unit sales to break-even=(($30,000+$5,260)/$86)*2
Unit sales to break-even=820 figurines
Working note:
The number of vases sold are 1500 and number of figurines sold are 1000, so the sales mix is 3:2.
ekkarill92 answered 1 year agoRelated Solutions
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each...
Multiple-Product Breakeven
Parker Pottery produces a line of vases and a line of ceramic
figurines. Each line uses the same equipment and labor; hence,
there are no traceable fixed costs. Common fixed cost equals
$40,000. Parker's accountant has begun to assess the profitability
of the two lines and has gathered the following data for last
year:
Vases
Figurines
Price
$40
$70
Variable cost
30
42
Contribution margin
$10
$28
Number of units
1,000
500
Required:
If required, round your final...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each...
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Parker Pottery produces a line of vases and a line of ceramic
figurines. Each line uses the same equipment and labor; hence,
there are no traceable fixed costs. Common fixed cost equals
$38,400. Parker's accountant has begun to assess the profitability
of the two lines and has gathered the following data for last
year:
Vases
Figurines
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$70
Variable cost
30
42
Contribution margin
$10
$28
Number of units
1,000
500
Required:
If required, round your final...
Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses...
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figurines. Each line uses the same equipment and labor; hence,
there are no traceable fixed costs. Common fixed cost equals
$30,000. Parker's accountant has begun to assess the profitability
of the two lines and has gathered the following data for last
year:
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Figurines
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$70
Variable cost
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Contribution margin
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$28
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