Patriot Co. manufactures flags in two sizes, small and large. The company has total fixed costs of $240,000 per year. Additional data follow.
The company is considering buying new equipment that would increase total fixed costs by $48,000 per year and reduce the variable costs of each type of flag by $1 per unit.
Required
1. Compute the weighted-average contribution margin without the new equipment.
2. Assume the new equipment is not purchased. Determine the break-even point in total sales units and the break-even point in units for each product.
3. Assume the new equipment is purchased. Compute the break-even point in total sales units and the number of units to sell for each product.
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