Patriot Company manufactures flags in two sizes, small and large. The company has total fixed costs of $260,000 per year. Additional data follow. Sales price per unit Variable costs per unit Sales mix percent Small $26 $ 13 80% Large $33 $20 20% The company is considering buying new equipment that would increase total fixed costs by $51,500 per year and reduce the variable costs of each type of flag by $1 per unit. Required: 1. Compute the weighted-average contribution margin without the new equipment. 2. Assume the new equipment is not purchased. Determine the break-even point in total sales units and the break-even point in units for each product. 3. Assume the new equipment is purchased. Compute the break-even point in total sales units and the number of units to sell for each product.
Patriot Company manufactures flags in two sizes, small and large. The company has total fixed costs of $260,000 per year. Additional data follow. Sales price per unit Variable costs per unit Sales mix percent Small $26 $ 13 80% Large $33 $20 20% The company is considering buying new equipment that would increase total fixed costs by $51,500 per year and reduce the variable costs of each type of flag by $1 per unit. Required: 1. Compute the weighted-average contribution margin without the new equipment. 2. Assume the new equipment is not purchased. Determine the break-even point in total sales units and the break-even point in units for each product. 3. Assume the new equipment is purchased. Compute the break-even point in total sales units and the number of units to sell for each product.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5EA: Maple Enterprises sells a single product with a selling price of $75 and variable costs per unit of...
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Step 1: Break even point:
VIEWStep 2: 1) Computation of Weighted average contribution margin without the new equipment:
VIEWStep 3: 2.) Calculation of break even point in total sales units and for each product:
VIEWStep 4: 3)Calculation of new break even sales in total and for each product if equipment is purchased:
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