ACCT 5233 Accounting for Managers

 

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.”

1. What is the company’s overall break-even point in dollar sales?
 
2. Of the total fixed expenses of $259,000, $44,100 could be avoided if the Velcro product is dropped, $86,000 if the Metal product is dropped, and $58,500 if the Nylon product is dropped. The remaining fixed expenses of $70,400 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely.
a. What is the break-even point in unit sales for each product?
b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company?