In multiproduct situations, when sales mix shifts toward the product with the lowest contribution margin then ________.
A) total revenues will increase
B) interest cost will decrease
C) total contribution margin will increase
D) operating income will decrease

Question

Quizplus · Accepted Answer

When the sales mix shifts toward the product with the lowest contribution margin, the overall contribution margin of the products decreases. This means that the total revenue will decrease as well because revenue is directly proportional to contribution margin. As a result, operating income will decrease. Therefore, option D is the correct answer. Options A, B, and C are not true, as decreasing contribution margin will have adverse impacts on all three aspects.

In Multiproduct Situations, When Sales Mix Shifts Toward the Product