Question

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $36,000 and variable expenses of $10,800. Product Y45E had sales of $27,280 and variable expenses of $12,276. The fixed expenses of the entire company were $17,300. 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:

Answer 1

Flesch Corporation produces and sells two products, in case if there is any shift in the sales from product Y45E to C90B, then the break even will also decrease since the contribution margin for Product C90B is less than the Product Y45E.

Explanation:

Contribution Margin: Total Contribution ÷ Total Sales

• Product C90B:

                  =(36000 - 10800) ÷ 36000 = 0.7

                  = 70%

remaining = 100 - 70 = 30%

• Product Y45E:

                 = (27280 - 12276) ÷ 27280

                 = 0.55 = 55%

remaining = 100 - 55 = 45%

Since the contribution margin of Product C90B < Product Y45E, the break even will decrease.