Assume that the company sells two products, X and Y, with contribution margins per unit of...
Assume that the company sells two products, X and Y, with contribution margins per unit of $12 and $10, respectively. What happens to the break-even point if the sales mix shifts to favor product X? (In other words, sales of product X will make up a higher percentage of the sales mix.)
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Break-even point increases.
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Break-even point decreases.
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Break-even point stays the same.
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None of these answers is correct.
Homework Answers
Dear student...Thank you for referring HomeworkLib...answer is Break-even point decreases.
This is because Product X has higher contribution per unit in comparison to product Y. So if sales of X increases weighted contribution per unit will increase while fixed cost will remain same. Thus Break even point will fall since
Break even point = Fixed cost/ Weighted contribution
Thus higher denominator will result in lower BEP
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