Deavila Inc. produces and sells
two products. Data concerning those products for the most recent month appear
below:

Product
Q91I

Product
J53Z


Sales

$

15,800

$

11,800


Variable expenses

$

5,800

$

5,060


Fixed expenses for the entire
company were $13,930.

Required:


a.

Determine the overall contribution
margin ratio for the company. (Round your answer
to 2 decimal places.)

b.

Determine the overall breakeven
point in total sales dollars for the company. (Round
your intermediate calculation to 2 decimal places and final answer to the
nearest dollar amount. Omit the "$" sign in your response.)

Breakeven point

$

c.

If the sales mix shifts toward
Product Q91I with no change in total sales, what will happen to the
breakeven point for the company?

It will result in a decrease in the company's overall breakeven point.
Explanation:
a.
Product
Q91I 
Product
J53Z 
Total


Sales

$

15,800

$

11,800

$

27,600

Variable expenses

5,800

5,060

10,860


Contribution margin

$

10,000

$

6,740

16,740


Fixed expenses

13,930


Net operating income

$

2,810


Overall CM ratio = Total
contribution margin/Total sales = $16,740/$27,600 = 0.61

b.
Breakeven point in total sales
dollars = Fixed expenses/Overall CM ratio = $13,930/0.61 = $22,836

c.
Product
Q91I

Product
J53Z


Sales (a)

$

15,800

$

11,800


Contribution margin
(b)

$

10,000

$

6,740


CM ratio (b)÷(a)

0.633

0.571


Since Product Q91I's CM ratio is
greater than Product J53Z's, a shift in the sales mix toward Product Q91I
will result in a decrease in the company's overall breakeven point.
