Milano Co. manufactures and sells three products: product 1, product 2, and product 3. Their unit selling prices are product 1, $40; product 2, $30; and product 3, $20. The per unit variable costs to manufacture and sell these products are product 1, $30; product 2, $15; and product 3, $8. Their sales mix is reflected in a ratio of 6:4:2. Annual fixed costs shared by all three products are $270,000. One type of raw material has been used to manufacture products 1 and 2. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: product 1 by $10 and product 2 by $5. However, the new material requires new equipment, which will increase annual fixed costs by $50,000. If the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product. If the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product. (Round to the next whole unit.) What insight does this analysis offer management for long-term planning? Please explain your work in detail and provide in-text citations. At least 5 references are required among which one should be the textbook as source of the data. Include the initial situation and initial assumptions in your answer.

1. break even number in units = $270,000 / $12 = 22,500

product 1 units = 22,500 x 6/12 = 11,250 units

total sales = 11,250 x $40 = $450,00 0

product 2 units = 22,500 x 4/12 = 7,500 units

total sales = 7,500 x $30 = $225,000

product 3 units = 22,500 x 2/12 = 3,750 units

total sales = 3,750 x $20 = $75,000

total sales = $750,000

2. break even number in units = $320,000 / $18.67 = 17,139.8 units

product 1 units = 17,139.8 x 6/12 = 8,569.9 ≈ 8,567 units

total sales = 8,567 x $40 = $342,680

product 2 units = 17,139.8 x 4/12 = 5,713.27 ≈ 5,714 units

total sales = 5,714 x $30 = $171,420

product 3 units = 17,139.8 x 2/12 = 2,856.63 ≈ 2,857 units

total sales = 2,857 x $20 = $57,140

total sales = $571,240

c. Management should start using the new material as soon as possible since it doesn't only decrease the break even point, if sales level remain the same, it will increase operating profits.

Explanation:

product 1's contribution margin = $10

product 2's contribution margin = $15

product 3's contribution margin = $12

sales mix = 6:4:2

weighted contribution margin = ($10 x 6/12) + ($15 x 4/12) + ($12 x 2/12) = $5 + $5 + $2 = $12

new contribution margin:

product 1's contribution margin = $20

product 2's contribution margin = $20

product 3's contribution margin = $12

sales mix = 6:4:2

weighted contribution margin = ($20 x 6/12) + ($20 x 4/12) + ($12 x 2/12) = $10 + $6.67 + $2 = $18.67

b. take periodic breaks and alternate between tasks.  

will increase work efficiency, and avoid health issues.

i guess you could put raise the economic balance