Problem 4-42. Multi-Product Operation with a Change in
Parameters
OBJECTIVE 1
2
4
Operating information for four different products sold by Kline Company follows:
Product
Product B Product C
Product D
A
Units sold
1,000
600
300
100
Sales
$500,000 $1,080,000 $2,760,000 $3,600,000
Variable product costs
300,000
630,000 1,650,000 2,350,000
Identifiable fixed product
25,000
220,000
300,000
300,000
costs
Variable
25,000
150,000
240,000
213,000
selling/administrative
Identifiable fixed
64,200
50,000
50,000
150,000
selling/administrative
Common fixed costs are $270,000 and the income tax rate is 35 percent.
? Required:
Note: Round all dollar values to the nearest dollar.
1. If all variable costs increased by 10 percent and the company incurred $1,000,000 in
additional advertising costs, what is the new BEP in revenue dollars and units of each
product?
2. How would your answer to Requirement 1 change if the expected unit sales changed
to 900, 400, 500, and 200, respectively?
3. What two different levels of sales revenue would be required under the revised
circumstances outlined in Requirements 1 and 2, respectively, for Kline to achieve an
after-tax profit of $2,470,000?
