Calculation of break-even points based on different sales mix assumptions and a-product – abandonment decision
M Ltd manufactures three products which have the following revenue and costs (£2er unit).
|
Product 1 |
2 _ |
3 |
|
|
Selling price |
2.92 |
1.35 |
2.83 |
|
Variable costs |
1.61 |
0.72 |
0.96 |
|
Fixed costs: |
|||
|
Product specific |
0.49 |
0.35 |
0.62 |
|
General |
0.46 |
0.46 |
0.46 |
Unit fixed costs are based upon the following annual sales and production volumes (thousand units):
|
Product 1 |
2 |
3 |
|
98.2 |
42.1 |
111.8 |
Required:
(a) Calculate:
(i) the break-even point sales (to the nearest £ hundred) of M Ltd based on the current product mix
(ii) the number of units of Product 2 (to the nearest hundred) at the break-even point determined in (i) above.
(b) Comment upon the viability of Product 2.
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