Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, sales of Product X have averaged 66% of the sales of Product Y. That ratio is not expected to change.
Assume that Catfur Company achieved its planned breakeven level of sales in dollars, but the mix of products sold was one-to-one. All actual costs and unit selling prices equaled budgeted amounts. What is the impact on profitability?

Answer (B) is correct. The expected sales mix is 40% for Product X and 60% for Product Y. Given that Product X has a 40% contribution margin ratio and Product Y has a 30% contribution margin ratio, selling more of Product X and less of Product Y increases the average contribution margin ratio. The effect is to lower the breakeven point. Thus, if the new composite unit includes 2 units of Product X and 2 units of Product Y, the composite unit selling price is $80 [(2 × $10) + (2 × $30)], and the composite UCM is $26 {[2 × ($10 – $6)] + [2 × ($30 – $21)]}. The new breakeven point in composite units is therefore 11,538.46 ($300,000 FC ÷ $26 UCM), and the new breakeven point in sales dollars is $923,077 (11,538.46 × $80). Given that sales reached the budgeted breakeven point of $942,857, Catfur must have made a profit of $19,780 ($942,857 – $923,077 ).