Final answer:
The total contribution margin for 2014 will be more than 20% higher than it was in 2013 if the sales mix changes and proportionately more products with a high contribution margin ratio are sold.
Step-by-step explanation:
If a company's total sales in 2014 were 20% higher than total sales in 2013, the change in total contribution margin for 2014 compared to 2013 will not necessarily match the percentage increase in sales. This is because the contribution margin ratio varies across the company's product lines.
If the sales mix remains constant, then we can expect the total contribution margin to be proportionally the same as the increase in sales, resulting in a 20% higher contribution margin. However, if the sales mix shifts toward products with a higher contribution margin ratio, the total contribution margin for 2014 could be more than 20% higher than in 2013. Conversely, if the sales mix shifts toward products with a lower contribution margin ratio, the increase in total contribution margin could be less than 20%. Hence, the correct answer is that the total contribution margin for 2014 will be:
- The same as it was in 2013, regardless of changes in sales mix
- 20% higher than it was in 2013, regardless of changes in sales mix
- More than 20% higher than it was in 2013, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2014 than in 2013 (Correct Answer)
- Less than 20% higher than it was in 2013, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2014 than in 2013