Balbuena Corporation produces and sells two products. Data concerning those products for the most recent month appear below: The fixed expenses of the entire company were $15,630. If the sales mix were to shift toward Product K87W with total sales dollars remaining constant, the overall break-even point for the entire company:

Question

Balbuena Corporation produces and sells two products. Data concerning those products for the most recent month appear below:  The fixed expenses of the entire company were $15,630. If the sales mix were to shift toward Product K87W with total sales dollars remaining constant, the overall break-even point for the entire company:

Quizplus · Accepted Answer

The break-even point is the level of sales at which total revenue equals total costs. Since the fixed expenses of the entire company are constant, any change in the sales mix (proportion of sales between the two products) will affect the contribution margin (sales - variable expenses) and, therefore, the break-even point.

If the sales mix shifts toward Product K87W, which has a higher contribution margin per unit (and assuming the total sales dollars remain constant), the overall contribution margin for the company will increase. This means that the break-even point will decrease because the company will need to sell fewer units to cover its fixed expenses.

Therefore, the correct answer is C: the overall break-even point for the entire company would decrease.

Balbuena Corporation Produces and Sells Two Products