Question - Algo 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 $35,000. 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: If required, round your final answers to nearest whole value.
1. Compute the number of vases and the number of figurines that must be sold for the company 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 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?