Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $35,640 and variable expenses of $8,910. Product Y45E had sales of $31,680 and variable expenses of $12,672. The fixed expenses of the entire company were $20,000. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $35,640 and variable expenses of $8,910. Product Y45E had sales of $31,680 and variable expenses of $12,672. The fixed expenses of the entire company were $20,000. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

Multiple Choice

• could increase or decrease.
• would not change.
• would decrease.

  Correct
• would increase.

Explanation

	Product C90B			Product Y45E
Sales (a)	$	35,640		$	31,680
Variable expenses		8,910			12,672
Contribution margin (b)	$	26,730		$	19,008
CM ratio (b) ÷ (a)		75	%		60	%

Since Product C90B has a higher contribution margin ratio, a shift in sales to that product would decrease the break-even point of the entire company.