ACCA PM · Chapter 5 · Question 9 of 10
A company sells two products. Product M has a contribution to sales ratio of 30% and product N a ratio of 55%. If the sales mix shifts towards product N while total revenue and fixed costs are unchanged, what will happen?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The breakeven revenue will fall
Explanation
Shifting the mix towards the product with the higher C/S ratio increases the weighted average C/S ratio. Breakeven revenue equals fixed costs divided by the weighted C/S ratio, so it falls, and profit at the same total revenue rises.
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