Eve's Emporium sells three products which have the following characteristics: $\begin{array}{c}
\begin{array}{ll}
\
\text { Product } & \text { Sales Mix } \
\text { P }& 60,000 \text { units } \
\text {Q} & 40,000 \text { units } \
\text {R} & 20,000 \text { units }
\end{array}
\begin{array}{cc}
\text { Unit} &\text { Unit Variable }\
\underline{\text { Price }}&
\underline{\text { Cost }}\
\$40&\$ 20 \
60 & 30 \
30 & 15
\end{array}
\end{array}$ If Eve can change the sales mix from 60,000 P, 40,000Q, and 20,000 R to 70,000 P, 45,000 Q, and 20,000 R, pre-tax profit will be:

Question

Quizplus · Accepted Answer

The pre-tax profit will be higher with the new sales mix because the products with higher unit contribution margins (P and Q) are being sold in greater quantities, increasing the overall profitability.

Eve's Emporium Sells Three Products Which Have the Following Characteristics