Answer the following questions using the information below:
The following information is for Alex Corp:

-If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.
A) increase
B) stay the same
C) decrease
D) will be greater than the original breakeven point

Question

Answer the following questions using the information below:
The following information is for Alex Corp:
 
-If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.
A) increase 
B) stay the same 
C) decrease 
D) will be greater than the original breakeven point

Quizplus · Accepted Answer

Without the sales mix shift, the breakeven point is set at a certain combination of units of Product X and Product Y. If the sales mix shifts to one unit of Product X and two units of Product Y, it means two things: first, the contribution margin ratio for Product Y is higher than that of Product X. Second, the sales of Product Y have increased, which means the total contribution margin will increase. Because the contribution margin has increased, the breakeven point will decrease. Therefore, the best choice is C: the breakeven point will decrease.

Answer the Following Questions Using the Information Below