The Morton Company produces and sells two products: A and B. Financial data related to producing these two products are summarized as follows: Product AProduct BSelling price$ 10.00$12.00Variable costs$ 5.00$10.00Fixed costs$ 2,000$ 600
(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 the breakeven 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? Assume that product A requires 0.5 hour per unit and B requires 0.25 hour per unit.