Answered: Multiple-Product Breakeven Parker…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 21E

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Question

Multiple-Product Breakeven

Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $30,000. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year:

	Vases	Figurines
Price	$40	$70
Variable cost	30	42
Contribution margin	$10	$28
Number of units	1,000	500

Required:

1. Compute the number of vases and the number of figurines that must be sold for the company to break even.

Break-even vases	fill in the blank 1 units
Break-even figurines	fill in the blank 2 units

2. Parker Pottery is considering upgrading its factory to improve the quality of its products. The upgrade will add $5,260 per year to total fixed cost. If the upgrade is successful, the projected sales of vases will be 1,500, and figurine sales will increase to 1,000 units. What is the new break-even point in units for each of the products?

Break-even vases	fill in the blank 3 units
Break-even figurines	fill in the blank 4 units

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