Question

Hargenrader, Inc. produces and sells two products. During the most recent month, Product P02S sales were $24,000 and its variable expenses were $7,920. Product O50U’s sales were $41,000 and its variable expenses were $14,180. The company’s fixed expenses were $40,350.

A. Determine the overall break-even point for the company in total sales dollars. Show your work. Check figure: $61,136

Contribution Margin = Sales Revenue – total variable costs

                                 = 65,000(24,000+41,000) – 22,100 (7,920+14,180)

                                 = 42,900

Overall CM ratio = Total contribution margin/total sales

                           =42,900/65,000

                            = 0.66

Break-even point in total sale dollars = Fixed expenses/Overall CM Ratio

                                                            = 40,350/0.66

                                                            = 61,136

B. What is the amount of sales for each product at the break-even point?

P02S BEP = 61,136*24,000/65,000 = 22,573

O50U BEP = 61,136*41,000/65,000 = 38,563

C. If the sales mix shifts toward Product P02S with no change in total sales, what will happen to the break-even point for the company? Explain.

Please answer question C

Answer 1

Part C.

When sales mix shifts toward Product P02S: It means sale s of Puduct P02S is $41,000 and total sales will be $65,000. So O50U's sales in $24,000.

	P02S	O50U's	Total
Old sales	24,000	41,000	65,000
Old cost	7,920	14,180	22,100
Contribution	16,080	26,820	42,900
Contribution %	0.670	0.654	0.660
New sales	41,000	24,000	65,000
Contribution %	0.670	0.654
Contribution amount	27,470.00	15,699.51	43,169.51
Overall contribution margin			0.664

Break-even point in total sale dollars = Fixed expenses/Overall CM Ratio

                                                            = 40,350/0.664

                                                            = $60,754.68