Flesch Corporation produces and sells two products, in case if there is any shift in the sales from product Y45E to C90B, then the breakeven will also decrease, since the contribution margin for Product C90B is less than the Product Y45E.
Contribution Margin: Total Contribution ÷ Total Sales
Product C90B:
=(26100-9135) ÷ 26100
= 35%
Product Y45E:
= (33540-15093) ÷ 33540
= 45%
Since the contribution margin of Product C90B < Product Y45E, the breakeven will decrease.
In the given case, the shift in the sales from product Y45E to C90B, also decreases the breakeven point, since the contribution perimeter for Product C90B is smaller than the Product Y45E.
Contribution margin is also known as the dollar contribution per unit. It is the per-unit selling price minus the per unit variable cost. Contribution stand for the portion of sales receipts that is not consumed by variable costs and so imparts to the sum of fixed costs.
The formula of contribution margin are:
[tex]\text{Contribution Margin} = \dfrac {\text{Total Contribution}}{\text {Total Sales}}[/tex]
Product C90B's contribution to margin:
[tex]\text{Contribution Margin} = \dfrac {\text{Total Contribution}}{\text {Total Sales}}\\\\\\\text{Contribution Margin} = \dfrac{(\$26,100-\$9,135)}{\$26,100}\\\\\\\text{Contribution Margin} = 35\%[/tex]
Product Y45E's contribution to margin:
[tex]\text{Contribution Margin} = \dfrac {\text{Total Contribution}}{\text {Total Sales}}\\\\\\\text{Contribution Margin} = \dfrac{(\$33,540-\$15,093)}{\$33,540}\\\\\\\text{Contribution Margin} = 45\%[/tex]
Because the contribution margin of Product C90B is less than the contribution margin of Product Y45E.
Therefore, the break-even point for the entire company will decrease.
Learn more about the contribution margin, refer to:
https://brainly.com/question/14902120lts
