You are a new consultant with the Boston Group and have been sent to advise the executives of penury Company. The company recently acquired product line L from an out-of-state concern and now plans to produce it, along with its old standby K, under one roof in a newly renovated facility. Management is quite proud of the acquisition, contending that the larger size and related cost savings will make the company far more profitable. The planner results of the months operations, based on managements best estimates of the maximum product demanded at todays selling price are:

	LINE K		LINE L
	Amount	Per unit	Amout	Per unit	Total
Sale revenue	$ 120,000.00	$ 1.20	$ 80,000.00	$ 0.80	$ 200.00
Variable expense	60000	0.60	60000	0.60	120
Contribution margin	$ 60,000.00	$ 0.60	$ 20,000.00	$ 0.20	$ 80.00
Fixed expense					50.00
Net income					$ 30.00

Required:

Based on historical operations, K alone incurred fixed expenses of $40,000, and L alone incurred fixed expenses of $20,000. Find the break-even point in sales dollars and units for each product separately.

Give reasons why the fixed cost for the two products combined are expected to be less than the sum of the fixed costs of each product line operating as a separate business.