National Co. manufactures and sells three products: red, white and blue. Their unit sales prices are red, $55; white $85; and blue $110. The per unit variable costs to manufacture and sell these products are red $40; white $60; and blue $80. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue) Annual fixed costs shared by all three products are $150,000 One type of raw material as 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 $10; white by $20; and blue by $10. However, the new material requires new equipment, which will increase
Kk.51.
National Co. manufactures and sells three products: red, white and blue. Their unit sales prices are red, $55; white $85; and blue $110. The per unit variable costs to manufacture and sell these products are red $40; white $60; and blue $80.
Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue)
Annual fixed costs shared by all three products are $150,000
One type of raw material as 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 $10; white by $20; and blue by $10.
However, the new material requires new equipment, which will increase annual fixed costs by $20,000
Task
a) If the company continous to use old material, determine its break-even point in both sales units and sales dollar of each individual product.
b) If the company uses the new material, determine its new break-even point in both sales unit and sales dollar of each individual product.
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