The Morton Company produces and sells two products, A and B. Following financial data on the products is available:
Product A Product B
Selling price $10.00 $12,00
Variable costs $5.00 $10.00
Fixed costs $2000.00 $600.00
Machining time 0.5 hrs 0.25 hrs (only need for part d)
a. If these products are sold in the ratio of 4A for 3B, what is the break-even point?
b. If the product mix has changed to 5A for 5B, what would happen to break-even point?
c. In order to maximize the profit, which product mix should be pushed?
d. If both products must go through the same manufacturing machine and there are only 30,000 machine hours available per period, which product should be pushed?