Week 5, LO 9 Demo - consider. Changes in the sales-mix...

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Week 5 Week 5 Skill Building Demonstration Problem 9 Compute the break-even point for a multiproduct company and explain the effects of shifts in the sales mix on contribution margin and the break-even point. Learning Objective 9 When a company produces more than one product they face the challenge to create sales composed of product combinations that yields the highest profit. This combination is referred to as the sales mix . To generate a higher profit, the company’s sales mix must contain a greater proportion of high profit-margin items. To find the sales mix with the highest profit, companies use contribution margin. Break-even analysis is also used by companies who produce more than one product. However, break-analysis becomes more complicated when there are multiple products to
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Unformatted text preview: consider. Changes in the sales-mix causes change in the companys profits. For example if the sales-mix increases in the sale of more high margin items and the same level of low margin items profits will increase. An increase in low margin items would also cause profits to increase but it would not be as dramatic as that of an increase in high margin items. Definitions Conrad Cookwares Peoria factory produces a kitchen set and a pots and pans set. Both of these products are good sellers, but their profit margins are quite different. Find the break-even point for the Peoria factory and the break-even sales for both products. Problem Break-even point in sales: Fixed Expenses = 9,000 = $15,000 Overall CM ratio 0.60 Check the work. .. Solution...
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This note was uploaded on 04/21/2011 for the course ACTG 211 taught by Professor Galvan during the Spring '11 term at Finger Lakes Community College.

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Week 5, LO 9 Demo - consider. Changes in the sales-mix...

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