Question

Question 7 Suppose that Jaxon Corporation has three products: Red, Black, and White. Red has the highest contribution margin per unit, Black has the second highest contribution margin per unit, and White has the lowest contribution margin per unit. Suppose that the composite break-even point (i.e., using the weighted-average contribution margin) was computed relying on the relative sales mix of 40% Red, 35% Black, and 25% White. If the sales mix were to change to 35% Red, 35% Black, and 30% White, what would happen to the composite break-even point

Answer 1

The information given show that the thing that will happen to the composite break-even point is that there'll be an increase in dollar sales to break even.

What is break even point?

It should be noted that a break even point simply means the point where the total revenue and the total cost are equal.

In this case, a shift in sales mix from high contribution margin to a low one has an effect. This raises the dollar sales required.

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