04 Mar Exercise 4-38 Multiple-Product BreakevenParker Pot
Exercise 4-38 Multiple-Product BreakevenParker 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 500Required: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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