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Isaza Corporation produces and sells two products. In the most recent month, Product U82U had sales of $28,000 and variable expenses of $13,440. Product P89W had sales of $18,000 and variable expenses of $7,260. And the fixed expenses of the entire company were $24,650. If the sales mix were to shift toward Product U82U with total sales remaining constant, the overall break-even point for the entire company:

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hyderali230

Answer:

The overall break-even point will be increased

Explanation:

Contribution margin ratio

( Sales - variable cost ) / Sales

U82U = ( $28,000 - $13,440 ) / $28,000 = $14,560 / $28,000 = 0.52

P89W = ( $18,000 - $7,260 ) / $18,000 = $10,740 / $18,000 = 0.60

As the contribution margin ratio of U82U is lower than the P89W, so, the shift of sales towards U82U will increase the overall break-even point because more unit with lower contribution will be needed to sale to recover the fixed cost.

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