Ticker Company sells two products. Product A provides a contribution margin of $3 per unit, and Product B provides a contribution margin of $4 per unit. If Ticker's sales mix shifts toward Product A, which one of the following statements is correct?
A) The total number of units necessary to break even will decrease.
B) The overall contribution margin ratio will increase.
C) Operating income will decrease if the total number of units sold remains constant.
D) The contribution margin ratios for Products A and B will change.

Question

Quizplus · Accepted Answer

If Ticker's sales mix shifts toward Product A, operating income will decrease if the number of units sold remains constant. Since Product A's contribution margin is lower than Product B's, there will be less contribution toward covering fixed costs resulting in lower operating income.

Ticker Company Sells Two Products