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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