A shift from high-margin sales to low-margin sales
A) may decrease net income, even though there is an increase in total units sold.
B) will always decrease net income.
C) will always increase net income.
D) will always increase units sold.

Question

Quizplus · Accepted Answer

When a company shifts from high-margin sales to low-margin sales, it may experience a decrease in net income, even if there is an increase in the total units sold. This is because each unit sold now generates less profit than before, thus offsetting any gains from increased sales volume. Furthermore, the shift may require additional expenses related to production, marketing, and distribution, which could further reduce profitability. Therefore, it is not accurate to say that such a shift will always increase or decrease net income or units sold, as it depends on the specific circumstances and strategy of the company.

A Shift from High-Margin Sales to Low-Margin Sales