Decision to change the sales mix

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Reference no: EM1311184

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?

Reference no: EM1311184

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