Froio Corporation Produces and Sells Two Products

question 96

Multiple Choice

Froio Corporation produces and sells two products.Data concerning those products for the most recent month appear below: Fixed expenses for the entire company were $26,570. If the sales mix were to shift toward Product M06M with total sales remaining constant,the overall break-even point for the entire company:

• A)would increase.
• B)could increase or decrease.
• C)would not change.
• D)would decrease.

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Definitions:

Overhead Cost

Expenses related to the operation of a business that cannot be directly tied to a specific product or service.

Activity-Based Costing

A costing methodology that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Overhead Cost

Expenses not directly tied to production but necessary for running the business, such as rent, utilities, and salaries for administrative staff.

Activity-Based Costing

An accounting method that apportions overhead and incidental costs to the respective products and services based on the specific activities involved.