Jones Company sells two products, Gumbo and Jumbo. Gumbo has a 45% contribution margin and Jumbo has a 55% contribution margin. Given these contribution margin percentages and assuming that other factors are equal, what should Jones Company do?

Question

Quizplus · Accepted Answer

Jones Company should emphasize Jumbo, as it has a higher contribution margin percentage than Gumbo. This means that for every dollar of sales, Jumbo contributes 55 cents towards covering fixed costs and generating profit, while Gumbo only contributes 45 cents. Therefore, by emphasizing Jumbo, the company can generate more profit per dollar of sales.

Jones Company Sells Two Products, Gumbo and Jumbo