Question
Patriot Company manufactures flags in two sizes, small and large. The company has total fixed costs of $240,000 per year. Additional data follow. Small Large
Patriot Company manufactures flags in two sizes, small and large. The company has total fixed costs of $240,000 per year. Additional data follow.
Small | Large | |
---|---|---|
Sales price per unit | $ 20 | $ 30 |
Variable costs per unit | $ 13 | $ 18 |
Sales mix percent | 80% | 20% |
The company is considering buying new equipment that would increase total fixed costs by $48,000 per year and reduce the variable costs of each type of flag by $1 per unit. Required: 1. Compute the weighted-average contribution margin without the new equipment. 2. Assume the new equipment is not purchased. Determine the break-even point in total sales units and the break-even point in units for each product. 3. Assume the new equipment is purchased. Compute the break-even point in total sales units and the number of units to sell for eachproduct.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started