Question

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100% Sparrow Company sells three different products that are similar, but are differentiated by various product features. Budgeted sales by product and in total for the coming year are shown below: Product Standard Deluxe Premium Total Percentage of total sales 48% 20% 32% Sales $240,000 $100,000 $160,000 $500,000 Less: variable costs 72,000 80,000 88,000 240,000 Contribution margin $168,000 $ 20,000 $ 72,000 $260,000 Less: fixed expenses $233,600 Net operating income $ 26,400 If the actual percentage of sales for the year were Standard, 40%; Deluxe, 50%; and Premium, 10%, than Select one: O A. the overall contribution margin would increase and break-even sales would increase. o O o B. the overall contribution margin would increase and break-even sales would decrease. C. the overall contribution margin would decrease and break-even sales would increase. D. the overall contribution margin would decrease and break-even sales would decrease.

Answer 1

Answer:Option :C Contibution Margin would Decrease and Break Even Poin will increase Percentage of Total Sales Sale Variabel Expenses Contribution Margin Fixed Cost Net operating Income Contribution Margin Income Statement Products Standard Delux Premium 40% 50% 10% 200000 100% 250000 100% 50000 100% 60000 30% 200000 80% 27500 55% 140000 70% 50000/ 20% 22500 45% Total Total 100% 500000 287500 212500 233600 -21100 100.0% 57.5% 42.5% Break Even in Dollar Sales = Fixed Cost / CM Ratio = (233600/42.50%) 549647