Flesch Corporation produces and sells two products. In the most recent month, Pr
ID: 2332836 • Letter: F
Question
Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $35,640 and variable expenses of $8,910. Product Y4SE had sales of $31,680 and variable expenses of $12,672. The fixed expenses of the entire company were $20,000. If the sales mix were to shift toward Product C908 with total dollar sales remaining constant, the overall break-even point for the entire company Multiple Cholce would decrease. would Increase could Increase or decrease would not changeExplanation / Answer
If the sales mix were to shift towards product C90B with total dollars Sales remaining constant then overall break even point for the entire company WOULD DECREASE as the contribution margin for Product C90B is higher than the Product Y45E.
The higher the contribution margin the lower will be the break even point since the company will be able to meet the break even point in less sales.
BEP in dollars = Fixed cost / Contribution margin Ratio. Higher the denominator value, lower will be the final answer.
Hence option is WOULD DECREASE.
C90B Y45E Total Sales (A) $35640 $31680 $67320 Variable Expenses (B) $8910 $12672 $21582 Contribution ( C = A-B) $26730 $19008 $45738 Contribution Margin Ratio ( D= C / A) 75% 60% 67.94%Related Questions
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