Question

Ingrum Corporation produces and sells two products. In the most recent month, Product R38T had sales of $20,000 and variable expenses of $7,400. Product X08S had sales of $39,000 and variable expenses of $6,170. The fixed expenses of the entire company were $41,160.

If the sales mix were to shift toward Product R38T with total sales remaining constant, the overall break-even point for the entire company:

Answer 1

Solution:

Computation of weighted average contribution margin ratio
Particulars	R38T	X08S	Total
Sales	$20,000.00	$39,000.00	$59,000.00
Variable costs	$7,400.00	$6,170.00	$13,570.00
Contribution margin	$12,600.00	$32,830.00	$45,430.00
Contribution margin ratio	63.00%	84.18%	77.00%

If the sales mix were to shift toward Product R38T with total sales remaining constant, results in decrease in weighted average contribution margin ratio, therefore overall breakeven point for the entire company will increase.