Asked by J’Myaa Tameriaa on Jun 28, 2024
Verified
A shift in the sales mix from low-margin items to high-margin items will decrease total profits even though total sales increase.
Sales Mix
The combination of products or services that a company sells, typically influencing the company's profits and strategy.
High-margin Items
Products or services that generate a significantly higher percentage of profit relative to their sales price.
- Recognize the crucial role and effects of sales composition on aggregate profitability and break-even thresholds.
- Assess how alterations in the sales mix influence the point of break-even and profit levels.
Verified Answer
SS
Sharoon SalimJul 02, 2024
Final Answer :
False
Explanation :
If a shift in the sales mix occurs from low-margin items to high-margin items, the overall profit will increase because the high-margin items will generate more profit per unit sold. This is known as the "product mix effect," which increases the overall profitability of the business. Thus, total profits will increase, not decrease.
Learning Objectives
- Recognize the crucial role and effects of sales composition on aggregate profitability and break-even thresholds.
- Assess how alterations in the sales mix influence the point of break-even and profit levels.