Question
Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $50; white, $80; and blue, $105. The per
Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $50; white, $80; and blue, $105. The per unit variable costs to manufacture and sell these products are red, $35; white, $55; and blue, $75. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $145,000. 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 $15; white, by $25; and blue, by $15. However, the new material requires new equipment, which will increase annual fixed costs by $15,000.
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 composite units up to next whole number.)
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