Product 1 has a contribution margin of $6.00 per unit,and Product 2 has a contribution margin of $7.50 per unit.Total fixed costs are $300,000.Sales mix and total volume varies from one period to another.How does this sales mix affect the profit and contribution margin?

Question

Quizplus · Accepted Answer

The sales mix can affect the overall profit and contribution margin. In this case, since Product 2 has a higher contribution margin per unit than Product 1, selling a higher proportion of Product 2 can lead to a higher overall contribution margin. However, the total volume also plays a role. As long as the total volume of both products is at least 50,000 units, and Product 2 accounts for at least 50% of the total volume, the overall operations will be profitable due to the high contribution margin. Therefore, option A is the best choice as it accurately reflects the impact of sales mix on profitability.

Product 1 Has a Contribution Margin of $6