Question - National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $63; white, $93; and blue, $118. The per unit variable costs to manufacture and sell these products are red, $48; white, $68; and blue, $88. Their sales mix is reflected in a ratio of 4:5:2 (red:white:blue). Annual fixed costs shared by all three products are $158,000. One type of raw material has been used to manufacture all three products. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: red, by $7; white, by $17; and blue, by $7. However, the new material requires new equipment, which will increase annual fixed costs by $28,000.
Required:
1. Assume if the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product.
2. Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product.