CASE 632 Break-Evens for Individual Products in a Multiproduct Company [ LO6 , LO9 ] Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: Wes, Im not sure how to go about answering the questions that came up at the meeting with the president yesterday. Whats the problem? The president wanted to know the break-even point for each of the companys products, but I am having trouble fi guring them out. Im sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00. Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below: Cases Velcro Metal Nylon Normal annual sales volume . . . . . . . . . 100,000 200,000 400,000 Unit selling price . . . . . . . . . . . . . . . . . . $1.65 $1.50 $0.85 Variable cost per unit . . . . . . . . . . . . . . . $1.25 $0.70 $0.25 Total fi xed expenses are $400,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or fi nished goods inventories. Required: 1. What is the companys over-all break-even point in total sales dollars? 2. Of the total fi xed costs of $400,000, $20,000 could be avoided if the Velcro product were dropped, $80,000 if the Metal product were dropped, and $60,000 if the Nylon product were dropped. The remaining fi xed costs of $240,000 consist of common fi xed costs such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely. a. What is the break-even point in units for each product? b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? Explain this result.