Problem 21-7A Break-even analysis with composite units LO P4 Patriot Co. manufactures and sells three products: red, white, and blue. Their unit selling prices are red, $63, white, $93, and blue, $118. The per unit variable costs to manufacture and sell these products are red, $48, white, $68, and blue, $88. Their sales mix is reflected in a ratio of 4:5:2 (red white:blue). Annual fixed costs shared by all three products are $158,000. 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 $7, white, by $17; and blue, by $11. However, the new material requires new equipment, which will increase annual fixed costs by $28,000. 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. 2. Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each Individual product. Required 1 Required 2 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.) 1. Determine its break-even point in both sales units and sales dollars of each individual product. Determine the selling price per composite unit. Ratio Selling price per unit Total per composite unit Red White Blue Determine the variable costs per composite unit. Ratio Variable cost per unit Red Total per composite unit White Blue Determine the break-even point in composite unit. Choose Numerator: Choose Denominator: - Break Even Units Break even units Determine its break-even point in units and sales dollars of each individual product. Number per Number of composite units to break even. Units sales at the break-even point Dollar sales at the break-even point composite unit Red White Blue Required 1 Required 2 Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product. (Round composite units up to next whole number.) 2. Determine its break-even point in both sales units and sales dollars of each individual product. Determine the selling price per composite unit. Ratio Selling price per unit Total per composite unit Red White Blue Determine the variable costs per composite unit. Ratio Variable cost per unit Total per composite unit Red White Blue Determine the break-even point in composite units. Choose Numerator: Choose Denominator: = Break Even Units Break even units Determine its break-even point in units and sales dollars of each individual product. Number per composite unit Number of composite units to break even. Units sales at the break-even point Dollar sales at the break-even point Red White Blue
