Multiple products make using financial models more complex.To deal with this,managers can do which of the following?
A)assume that all products have the a different contribution margin.
B)assume a weighted average contribution margin.
C)use contribution margin as a measure of volume.
D)All of the answers are correct.

Question

Quizplus · Accepted Answer

Assuming a weighted average contribution margin takes into account the varying contribution margin of each product and provides a more accurate representation of the overall profitability of the product mix. This approach can help managers make informed decisions and effectively allocate resources. Assuming that all products have a different contribution margin or using contribution margin as a measure of volume may oversimplify the analysis and lead to incorrect conclusions. Therefore, option B is the best choice.

Multiple Products Make Using Financial Models More Complex