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Chapter 21: Q-21-13 (page 1167)

Explain how the sales mix can affect the profitability of a company.

Short Answer

Expert verified

Answer

A sales mix is the combination of all the products sold and services rendered by the company.

Step by step solution

01

Sales mix

A sales mix is the combination of all the products sold and services rendered by the company. All products and services are considered separate businesses and individual profit is calculated for all the products and services.

02

how sales mix can affect the profitability of a company.

The sales mix affects the profitability of a company because the different product has a different contribution margin per unit. A varying sales mix produces different profits for the company. For example, if the sales mix contains a larger portion of the product generating a low contribution margin per unit then the total profitability of the company comes down and vice versa.

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Most popular questions from this chapter

When units produced exceed units sold, how does operating income differ between variable costing and absorption costing? Why?

Computing variable costing contribution margin

Refer to your answers to Short Exercise S21-6. Product X sells for \(175 per unit. Assume no beginning inventories. Calculate the contribution margin using variable costing when Adamson:

  1. Produces and sells 2,000 units.
  2. Produces 2,500 units and sells 2,000 units
  3. Produces 5,000 units and sells 2,000 units.

S21-6 Direct materials \) 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per year

Pierce Company had the following costs:

Units produced

500 units Manufacturing costs:

Direct materials

$ 25 per unit Direct labor

45 per unit Variable manufacturing overhead

15 per unit Fixed manufacturing overhead

5,000 per year Selling and administrative costs:

Variable selling and administrative costs

30 per unit Fixed selling and administrative costs

3,200 per year

Calculate the unit product cost using absorption costing and variable costing

Question: Computing absorption costing operating income

Refer to the information for Concord, Inc.

Requirements

  1. Using absorption costing, calculate the unit product cost.
  2. Prepare an income statement using the traditional format.

Use the following information for Exercises E21-14 and E21-15.

Concord, Inc. has collected the following data for November (there are no beginning inventories):

Units produced and sold 500 units Sales price $ 450 per unit Direct materials 64 per unit Direct labor 68 per unit Variable manufacturing overhead 26 per unit Fixed manufacturing overhead 7,500 per month Variable selling and administrative costs 15 per unit Fixed selling and administrative costs 4,400 per month

Using absorption and variable costing

Meyer Company reports the following information for March:

Net Sales Revenue $ 45,300

Variable Cost of Goods Sold 12,500

Fixed Cost of Goods Sold 11,800

Variable Selling and Administrative Costs 14,000

Fixed Selling and Administrative Costs 5,400

Requirements:

  1. Calculate the gross profit and operating income for March using absorption costing.
  2. Calculate the contribution margin and operating income for March using variable costing.
See all solutions

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