A company's best sales mix is determined using contribution margin per unit of scarce resource.

Question

Quizplus · Accepted Answer

To maximize profits, a company must use its scarce resources (such as labor, raw materials, production capacity) in the most effective way. One way to do this is by analyzing the contribution margin (sales price minus variable costs) per unit of scarce resource required for each product in the company's portfolio. This helps the company identify the products with the highest profit potential and allocate its resources accordingly.

A Company's Best Sales Mix Is Determined Using Contribution Margin