Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows: ProductUnits SoldSales MixA18,32080%B4,58020Total22,900100% Assume the following unit selling prices and unit variable costs: ProductSelling PriceVariable CostContribution MarginA$ 90$ 75$ 15B15011040 Fixed costs are $420,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes.--Assume the original facts except that now fixed costs are expected to be $42,000 higher than originally planned. How does this expected increase in fixed costs affect the breakeven point in units? How does the percentage change in the breakeven point compare to the percentage increase in fixed costs?

It is that point of sale, where contribution margin and fixed costs are same. As a result of which…

Answered: Most businesses sell several products…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...

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Most businesses sell several products at varying prices. The products often have different unit variable costs. Thus, the total profit and the breakeven point depend on the proportions in which the products are sold. Sales mix is the relative contribution of sales among various products sold by a firm. Assume that the sales of Jordan Incorporated for a typical year are as follows:

Product	Units Sold	Sales Mix
A	18,320	80%
B	4,580	20
Total	22,900	100%

Assume the following unit selling prices and unit variable costs:

Product	Selling Price	Variable Cost	Contribution Margin
A	$ 90	$ 75	$ 15
B	150	110	40

Fixed costs are $420,000 per year. Assume that the sales mix, expressed in terms of relative physical units sold, is constant as sales volume changes.

--Assume the original facts except that now fixed costs are expected to be $42,000 higher than originally planned. How does this expected increase in fixed costs affect the breakeven point in units? How does the percentage change in the breakeven point compare to the percentage increase in fixed costs?

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