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Problem #1: Break-even with Multiproduct Company Donuts & More sells three different products, bagels, muffins & donuts. The owner of this small company is trying
Problem #1: Break-even with Multiproduct Company Donuts & More sells three different products, bagels, muffins & donuts. The owner of this small company is trying to determine the break-even point for each of the company's products. You have been hired as a consultant to assist with this project. You have been provided with the following information: Donut Bagel. Muffin Normal annual sales volume 280,000 105,000 195,000 Unit selling price 2.00 1.00 2.50 1.00 0.80 Variable cost per unit 0.40 Total fixed costs for the entire company are $270,000. The products are sold in a very competitive market so the company does not have any flexibility in raising its prices without losing a large number of customers. The company has no work in process or finished goods inventory. Requirements (1) What is the company overall break-even point in sales dollars? (2) of the total fixed costs of $270,000, $15,000 could be avoided if the bagel product line were dropped, $25,000 if the muffin product line were dropped, and $50,000 if the donut product line were dropped. The remaining fixed expenses of $180,000 consist of common fixed costs such as salaries and rental of the building. 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
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