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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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    Solution Preview

    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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