Question

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $24,080 and variable expenses of $6,020. Product Y45E had sales of $26,660 and variable expenses of $13,330. The fixed expenses of the entire company were $23,200. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:_________.
a. would not change.

b. would decrease.

c. would increase.

Answer 1

Answer: c. would increase

Explanation:

Given Data:

Sales of product C90B= $24,080

Variable expense = $6,020

Sales of Product Y45E = $26,660 Variable expenses = $13,330.

Fixed expenses of entire company = $23,200

Therefore:

Contribution Margin: Total Contribution ÷ Total Sales

Product C90B:

= $( 24,080 - 6,020 ) ÷ $24,080 * 100

= 75%

Product Y45E

= $( 26660 - 13330 ) ÷ $26660 * 100

= 50%

Since the contribution margin of product C90B is greater than Y45E, they would be an increase.