In multiple product companies, a shift in the sales mix from less profitable pro

Question

In multiple product companies, a shift in the sales mix from less profitable products to more profitable products will cause the company's breakeven point to: increase; decrease; there will be no change in the break-even point; none of these. Herman Corp. has two products, A and B, with the following total sales and total variable costs: What is the overall contribution margin ratio? 70%; 50%; 30%; 40%. Hardee Company sells a single product The selling price is $30 per unit and the variable expense is $18 per unit. The company's most recent annual contribution format income statement is given below: Compute the contribution margin per unit. $ Compute the CM ratio % Compute the break-even point in sales dollars. $ Compute the break-even point in units sold, units.

Explanation / Answer

(10)
b decrease (since you have higher contribution margin so breakeven point will be lower)

(11)
Overall contribution margin ratio = (10000 + 30000 - 4000 - 24000)/(30000 + 10000) = 12000/40000 = 30%

(c) is the answer.

(12)

(a) Contribution margin per unit = 30 - 18 = $12

(b) CM Ratio = 12/30 = 40%

(c) Breakeven point in sales dollars = 48000/0.4 = $120000

Hope this helps!

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