Each of a company's two product lines has a different contribution margin ratio. If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio, which of the following is true?

Question

Quizplus · Accepted Answer

If the sales mix shifts towards the product with the higher contribution margin ratio, then the overall average contribution margin ratio will increase. As a result, the company's operating income will also increase. Moreover, the break-even point will decrease because the higher contribution margin ratio means that the company will reach break-even with fewer sales. Therefore, all of the above choices are true.

Each of a Company's Two Product Lines Has a Different