When the actual sales-mix shifts toward a mix of products with lower contribution margins, there will be negative effects on a firm's:
A) Sales mix and sales quantity variances.
B) Sales quantity and sales volume variances.
C) Sales volume and market mix variances.
D) Market mix and sales mix variance.
E) Sales mix and sales volume variances.

Question

Quizplus · Accepted Answer

When the actual sales-mix shifts toward a mix of products with lower contribution margins, the firm's sales mix variance will be negative because the actual sales mix differs from the budgeted sales mix. Also, the sales volume variance will be negative because even though the quantity of products sold may be higher, the lower contribution margins will result in lower overall profits. Therefore, the best choice is E.

When the Actual Sales-Mix Shifts Toward a Mix of Products