Break-Even Analysis with Multiple Products
You Are a New Consultant $\quad$

question 29

Essay

Break-even analysis with multiple products
You are a new consultant with the Boston Group and have been sent to advise the executives of Penury Company. The company recently acquired product line L from an out-of-state concern and now plans to produce it, along with its old standby K, under one roof in a newly renovated facility. Management is quite proud of the acquisition, contending that the larger size and related cost savings will make the company far more profitable. The planned results of a month's operations, based on management's best estimates of the maximum product demanded at today's selling prices are: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { LINE K }$$\quad$$\quad$$\quad$$\quad$ $\quad$$\text { LINE L }$
$\begin{array}{|l|r|r|r|r|r|}\hline &\text { Amount } &\text { Per }& \text { Amount } &\text { Per } &\text { Total} \\&&\text { Unit }&&\text { Unit }\\ \hline\begin{array}{l} \text { Sales } \\\text { revenue }\end{array} & \$ 120,000 & \$ 1.20 & \$ 80,000 & \$ 0.80 & \$ 200,000 \\\hline \begin{array}{l}\text { Variable } \\\text { expense }\end{array} & 60,000 & 0.60 & 60,000 & 0.60 & 120,000 \\\hline \begin{array}{l}\text { Contribution } \\\text { margin }\end{array} & \$ 60,000 & \$ 0.60 & \$ 20,000 & 0.20 & 80,000 \\\hline \begin{array}{l}\text { Fixed } \\\text { expense }\end{array} & & & & & 50,000 \\\hline \begin{array}{l}\text { Net income } \\\end{array} & & & & & \$ 30,000 \\\hline\end{array}$ Required:
a. Based on historical operations, K alone incurred fixed expenses of $40,000, and L alone incurred fixed expenses of $20,000. Find the break-even point in sales dollars and units for each product separately.
b. Give reasons why the fixed costs for the two products combined are expected to be less than the sum of the fixed costs of each product line operating as a separate business.
c. Assuming that for each unit of K sold, one unit of L is sold, find the break-even point in sales dollars and units for each product.

Identify the impact of logistics costs and the economic and strategic decisions behind facility location, including the influence of tariffs and global competition.

Understand the terms and technologies related to measuring heart activity, including the use of an electrocardiogram (ECG).

Identify and understand the different components of the cardiac cycle as represented on an ECG.

Recognize the anatomy and function of the heart's conduction system and its role in generating heart rhythm.

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Definitions:

Sublimation

A defense mechanism where socially unacceptable impulses or idealizations are unconsciously transformed into socially acceptable actions or behavior.

Object Relations Theory

A psychoanalytic theory suggesting that relationships and interactions with significant others, especially parents, during infancy shape an individual's personality and relationships in adulthood.

Melanie Klein

A pioneering figure in psychoanalysis, particularly known for her work in child analysis and her theories on the importance of fantasy, play therapy, and the early stages of child development.

Collective Unconscious

A concept in Jungian psychology referring to a part of the unconscious mind which is shared among beings of the same species and contains universal experiences.