Fjeld Corporation produces and sells two products.In the most recent month,Product C66G had sales of $20,000 and variable expenses of $7,200.Product U11T had sales of $19,000 and variable expenses of $8,400.And the fixed expenses of the entire company were $21,740.If the sales mix were to shift toward Product C66G with total dollar sales remaining constant,the overall break-even point for the entire company:

Question

Quizplus · Accepted Answer

To determine the overall break-even point for the entire company, we need to calculate the contribution margin ratio for each product and then use that information along with the fixed expenses to calculate the overall break-even point.

Contribution margin ratio = (Sales - Variable Expenses) / Sales

For Product C66G: 
Contribution margin ratio = ($20,000 - $7,200) / $20,000 = 0.64

For Product U11T: 
Contribution margin ratio = ($19,000 - $8,400) / $19,000 = 0.56

Now, assuming total dollar sales remain constant, if the sales mix were to shift towards Product C66G, it would mean that the sales of Product C66G would increase relative to Product U11T. This would result in a higher overall contribution margin ratio for the company because Product C66G has a higher contribution margin ratio than Product U11T.

As a result, the overall break-even point for the entire company would decrease because the higher contribution margin ratio would require fewer sales to cover the fixed expenses.

Fjeld Corporation Produces and Sells Two Products