Crown Company produces and sells two products.The following monthly data are provided: $\begin{array}{lrr}
&\text { Slicer }&\text {Chopper }\
\text { Unit selling price } & 10 & \$ 15 \
\text { Variable manufacturing costs } & 6 &9 \
\text { Variable selling and administrative costs } & 1 & 1 \
\text { Estimated unit sales per month } & 280 & 420
\end{array}$
The break-even point for the current sales mix is 360 units (144 Slicer models and 216 Chopper models).What would be the impact on profit if 360 units are sold but 145 Slicer models are sold instead of 144?
A) $3 decrease
B) $5 increase
C) $2 decrease
D) $2 increase

Question

Crown Company produces and sells two products.The following monthly data are provided: $\begin{array}{lrr}
&\text { Slicer }&\text {Chopper }\
\text { Unit selling price } & 10 & \$ 15 \
\text { Variable manufacturing costs } & 6 &9 \
\text { Variable selling and administrative costs } & 1 & 1 \
\text { Estimated unit sales per month } & 280 & 420
\end{array}$
 The break-even point for the current sales mix is 360 units (144 Slicer models and 216 Chopper models).What would be the impact on profit if 360 units are sold but 145 Slicer models are sold instead of 144?
A) $3 decrease
B) $5 increase
C) $2 decrease
D) $2 increase

Quizplus · Accepted Answer

Since the current sales mix includes 144 Slicer models and the break-even point for this mix is 360 units, it means that the Chopper model has a higher contribution margin per unit than the Slicer model. If one unit of Slicer model is replaced with one unit of Chopper model, the overall contribution margin per unit will increase (because the Chopper model has a higher contribution margin per unit than the Slicer model). However, the company will only sell one less Slicer model which has a lower contribution margin per unit. Therefore, the overall effect on profit will be a decrease of $2 only.

Crown Company Produces and Sells Two Products The Break-Even Point for the Current Sales Mix Is 360