Question

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $21,120 and variable expenses of $5,280. Product Y45E had sales of $19,200 and variable expenses of $10,560. The fixed expenses of the entire company were $22,800. 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

Answer:

Decreases

Explanation:

Data given in the information

Sales, variable expenses, and the fixed expenses of both product are given so by this information we determine the contribution margin ratio of the both product

Contribution margin  = Sales - Variable expense

And, Contribution margin ratio = (Contribution margin) ÷ (Sales revenue) × 100

For Product C90B

= ($21,120 - $5,280) ÷ ($21,120) × 100

= 75%  

For Product Y45E

= ($19,200  - $10,560) ÷ ($19,200) × 100

= 45%  

As we can see that the Product C90B has highest contribution margin ratio than the Product Y45E so if there is a shift in sales toward Product C90B with total dollar sales remaining constant so the break even point decreases