Maxie Pty Ltd Makes and Sells Two Types of Shoes

question 43

Multiple Choice

Maxie Pty Ltd makes and sells two types of shoes, Plain and Fancy. Product data is as follows:
Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000 and the sales mix remains constant. Assume an income tax rate of 20 per cent.
The break-even point for this data is 5000 units in total. How will the calculation of the break-even point change (if at all) if the relative percentages of the products in the mix change from 60 per cent Plain shoes to 40 per cent Fancy shoes?

• A) The break-even point in total will not change. The only change will be the relative number of each of the units.
• B) Neither the break-even point in total nor the relative number of each of the units to produce at break-even will change.
• C) The break-even point will change because the calculation above assumes a constant mix, namely 60 per cent to 40 per cent.
• D) The break-even point will be higher.

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Definitions:

Flatness Tolerance

A specification that defines the permissible amount of deviation from a perfectly flat surface.

Circularity

A geometric tolerancing term that describes the condition where all points on a circular feature are equidistant from a common center, ensuring roundness.

Ovality

A measurement of deviation from a perfect circle, often used to describe the condition or imperfection in cylindrical objects.