In multiproduct situations, when sales mix shifts toward the product with the lowest contribution margin, the operating income will be lower.

Question

Quizplus · Accepted Answer

This is true because the contribution margin is the difference between the selling price and the variable costs associated with producing a product. Therefore, if the sales mix shifts towards a product with a lower contribution margin, the overall contribution margin of the product mix will be lower, resulting in lower operating income.

In Multiproduct Situations, When Sales Mix Shifts Toward the Product