SALES MIX

DECISION
GROUP 5
AC 519 12:30-1:30 MWF
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 If you produces multiple product

lines or variations of the same
product, do you know the
profitability by individual
product?
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 Which products make your

company the most money?
 Which products make the least?
 Could you be losing money on
some of the products that you
sell?
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1.
Objective of sales
mix decision
IS TO SELECT THE ALTERNATIVE THAT
MAXIMIZES THE CONTRIBUTION MARGIN
PER CONSTRAINED RESOURCE.
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The decision analysis, which uses

incremental analysis to identify the
relevant costs and revenues, consist of 2
steps:
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✖ Step 1: Calculate the contribution

margin per unit for each product or
service affected by constrained
resource as follows:

✖ Selling Price per Unit

- Variable Costs per Unit
CONTRIBUTION MARGIN PER UNIT
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✖ Step 2: Calculate the contribution

margin per unit of the constrained
resource as follows.

✖ CONTRIBUTION MARGIN Contribution Margin per Unit

PER UNIT OF Quantity of Constrained
CONSTRAINED RESOURCES= Resource Required per Unit
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If the sales mix changes,

then the break-even point
will also change.
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Sales mix
o Can also be o Example:
measured in units If More-Power plans
sold or in on selling 75,000
proportion of the regular sanders and
revenue 30,000 mini sanders,
then the sales mix in
units is 75000:30000.
It can be reduced to
75:30 and further 5:2.
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Sales mix
o Alternatively, it can o Example:
be represented by The regular sander
the percent of total revenue is $3M ($40 x
revenue 75,000), and the mini
contributed by each sander revenue is
product. $1.8M ( $60x 30,000).
The regular sander
accounts for 62.5% of
total revenue and the
mini sanders account
for 37.5%
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Thank you!