From the data given , See whether decision to change the sales mix as per question is advisable or not ?
Penury Company offers two products. At present, the following represents the usual results of a month\'s operations:
|
|
Product K
|
Product L
|
|
|
|
|
Per
|
|
Per
|
Combined
|
|
|
Amount
|
Unit
|
Amount
|
Unit
|
Amount
|
|
Sales revenue.....................
|
$120,000
|
$1.20
|
$80,000
|
$0.80
|
$200,000
|
|
Variable expenses..............
|
60,000
|
0.60
|
60,000
|
0.60
|
120,000
|
|
Contribution margin..........
|
$ 60,000
|
$0.60
|
$20,000
|
$0.20
|
80,000
|
|
Fixed expenses..................
|
|
|
|
|
50,000
|
|
Net operating income........
|
|
|
|
|
$ 30,000
|
The company is considering decreasing product K\'s unit sales to 80,000 and increasing product L\'s unit sales to 180,000, leaving unchanged the selling price per unit, variable expense per unit, and total fixed expenses. Would you advise adopting this plan?