The sales-mix variance will be unfavorable when which of the following occurs?
A) the actual sales mix shifts toward the less profitable units
B) the contribution margin per composite unit for the actual mix is greater than the budgeted mix
C) the actual unit sales are less than the budgeted unit sales
D) the actual contribution margin is less than the static-budget contribution margin

Question

Quizplus · Accepted Answer

The sales-mix variance measures the effect of differences between the actual sales mix and the budgeted sales mix on profitability. If the actual sales mix shifts toward the less profitable units, the overall profitability will decrease, resulting in an unfavorable sales-mix variance. Option B is incorrect because a higher contribution margin for actual sales mix would result in a favorable sales-mix variance. Option C is incorrect because the sales quantity variance measures the effect of differences between actual and budgeted sales quantities. Option D is incorrect because the contribution-margin variance measures the effect of differences between the actual and budgeted contribution margin.

The Sales-Mix Variance Will Be Unfavorable When Which of the Following