Piedmont Fasteners Corporation makes three different clothing fasteners in its manufacturing facility in North Carolina. Data concerning these products appear below:

Total fixed expenses are $400,000 per year.
All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers.
The company has an extremely effective lean production system, so there is no beginning or ending work in process or finished goods inventories.
Required:
1. What is the company's over-all break-even point in dollar sales?
2. Of the total fixed expenses of $400,000, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $240,000 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely.
a. What is the break-even point in unit sales for each product?
b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company?

Transcribed Image Text:

Metal Nylon Normal annual sales volume 100,000 200,000 400,000 $0.85 $0.25 Velcro Unit selling price Variable expense per unit $1.65 $1.25 $1.50 $0.70