If the ability to sell and the amount of production facilities devoted to each of two products is equal,it is profitable to increase the sales of that product with the highest contribution margin.

Question

Quizplus · Accepted Answer

Increasing the sales of the product with the highest contribution margin will lead to a higher profit margin as long as the production resources are allocated equally. This is because the contribution margin represents the amount of profit each unit of a product generates after deducting its variable costs, which means that the higher the contribution margin, the more profit the product contributes towards covering the fixed costs and generating a profit. Therefore, increasing the sales of the product with the highest contribution margin will result in a higher overall profit margin.

If the Ability to Sell and the Amount of Production