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

Question

Quizplus · Accepted Answer

When the sales mix shifts towards the product with the lowest contribution margin, the overall contribution margin per unit decreases. This means that the breakeven quantity will increase as fixed costs are spread over fewer units, and the operating income will decrease as there is less contribution margin available to cover fixed costs and generate profits. Therefore, the correct option is D. Total revenues and total contribution margin may or may not be affected by the shift in sales mix, as they depend on the price and quantity of each product sold.

In Multiproduct Situations, When Sales Mix Shifts Toward the Product