| Total fixed expenses are $257,000 per year. |
All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. |
The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories. |
Case 5-32 Break-Evens for Individual Products in a Multiproduct Company [LO 5-5, LO 5-9]
Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: "Wes, I'm not sure how to go about answering the questions that came up at the meeting with the president yesterday." |
| "What's the problem?" |
"The president wanted to know the break-even point for each of the company's products, but I am having trouble figuring them out." |
"I'm sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00." |
Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below: |
Velcro | Metal | Nylon | |
| Normal annual sales volume | 117,000 | 191,000 | 289,000 |
| Unit selling price | $2.00 | $1.50 | $1.10 |
| Variable expense per unit | $.80 | $.70 | $.90 |
| |||
| Total fixed expenses are $257,000 per year. | ||||||||||||||
All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. | ||||||||||||||
The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories.
| ||||||||||||||
9 years ago
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