Exercise 4-38 multiple-product breakevenparker pottery, Ask an Expert

Accounting

Exercise 4-38 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 gath- ered 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 com- pany to break even.

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 pro- jected 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?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91883220

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