From the course: Accounting Foundations: Managerial Accounting

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Sales mix

Sales mix

From the course: Accounting Foundations: Managerial Accounting

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Sales mix

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- Have you ever gone into McDonald's and had them offer to upsize your hamburger? No, they offer to upsize your fries in your drink. Why is that? Because the contribution margin on fries and drinks are so much higher than the margin on hamburgers. That brings us to the topic of sales mix. Sales mix is the proportion of sales revenue represented by each of a company's products. While the examples thus far involve companies with only one product, most companies have more than one product. To illustrate how a change in sales mix can affect a company's CVP relationships, assume that Multi-Product Inc. sells three different products. Following are the monthly revenues and costs for each type of product. Total sales are $100,000, which includes 25,000 in sales for product A, 45,000 of product B, and 30,000 of product C. Therefore the sales mix and sales dollars is 25% product A, 45% product B and 30% product C. With this…

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