Comings Corporation produces and sells two products. In the most recent month, Product R19J had sales of $30,000 and variable expenses of $9,000. Product O37G had sales of $34,000 and variable expenses of $10,840. The fixed expenses of the entire company were $35,560. If the sales mix were to shift toward Product R19J with total dollar sales remaining constant, the overall break-even point for the entire company:
A)would increase.
B)would not change.
C)could increase or decrease.
D)would decrease.

Question

Quizplus · Accepted Answer

The overall break-even point for the entire company would decrease if the sales mix were to shift toward Product R19J. This is because R19J has a higher contribution margin ($21,000 = $30,000 - $9,000) compared to O37G ($23,160 = $34,000 - $10,840). As fixed costs are constant, a higher contribution margin per product leads to a lower overall break-even point. Therefore, if the sales mix shifts towards R19J, the company will need to sell fewer units in total to cover its fixed costs.

Comings Corporation Produces and Sells Two Products