Intermediate: Calculation of break-even points based on different sales mix assumptions and a product abandonment decision M Ltd manufactures three products which have the following revenue and costs (£ per unit).

Required:

(a) Calculate:
(i) the break-even point sales (to the nearest £ hundred) of M Ltd based on the current product mix (9 marks)
(ii) the number of units of Product 2 (to the nearest hundred) at the break-even point determined in (i) above. (3 marks)

(b) Comment upon the viability of Product 2.LO1

Transcribed Image Text:

Product 1 2 3 Selling price 2.92 1.35 2.83 Variable costs 1.61 0.72 0.96 Fixed costs: Product specific 0.49 0.35 0.62 General 0.46 0.46 0.46 Unit fixed costs are based upon the following annual sales and production volumes (thousand units): Product 1 2 3 98.2 42.1 111.8