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Breakeven point in dollar sales and composite units

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Patroit Company: breakeven point in dollar sales and composite units

Patriot Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $20; white,
$35; and blue, $65. The per unit variable costs to manufacture and sell these products are red, $12; white, $22;
and blue, $50. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all
three products are $250,000. 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 $6; white, by $12; and blue, by $10. However, the new material requires new
equipment, which will increase annual fixed costs by $50,000.
Requirement 1:
If the company continues to use the old material, determine its break-even point in both sales units and sales
dollars of each individual product. (Omit the "$" sign in your response. Round product units up to the next
whole number and use for further calculations.)
Break-Even Points Sales Units Sales Dollars
Red at break-even $
White at break-even $
Blue at break-even $
Requirement 2:
If the company uses the new material, determine its new break-even point in both sales units and sales dollars of
each individual product. (Omit the "$" sign in your response. Round product units to the nearest whole
number and use for further calculations.)
Break-Even Points Sales Units Sales Dollars
Red at break-even $
White at break-even $
Blue at break-even $

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When there are two or more products and a common fixed cost, the breakeven is determined by calculating the weighted average contribution margin ...

Solution Summary

The solution explains how to calculate the breakeven point with a given sales mix

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