Ticker Company sells two products. Product A provides a contribution margin of $3 per unit, and Product B provides a contribution margin of $4 per unit. If Ticker's sales mix shifts toward Product A, which one of the following statements is correct?
*Source: Retired ICMA CMA Exam Questions.
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The contribution margin ratios for Products A and B will change.
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Operating income will decrease if the total number of units sold remains constant.
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The overall contribution margin ratio will increase.
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The total number of units necessary to break even will decrease.
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You Answered Incorrectly.
As the sales mix shifts towards a product with a lower contribution margin, operating income will decrease if the total number of units sold remains constant.
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Syed Yousuf Jamal
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