In multiproduct situations,when the sales mix shifts toward the product with the highest contribution margin per unit,then:
A)total revenues will decrease.
B)breakeven quantity will increase.
C)total contribution margin will decrease.
D)operating income will increase.

Question

Quizplus · Accepted Answer

When the sales mix shifts toward the product with the highest contribution margin per unit, operating income will increase because the product with the highest contribution margin per unit is making a larger contribution to the overall profitability of the company. It may also lead to a decrease in breakeven quantity, as the product with the highest contribution margin may be able to cover fixed costs more efficiently. Total revenues and total contribution margin may or may not decrease, depending on the specifics of the situation.

In Multiproduct Situations,when the Sales Mix Shifts Toward the Product