Final answer:
Variable costing is preferred for sales mix decisions because it focuses on the variable costs that change with production levels, offering a clearer view of each product's contribution to profitability.
Step-by-step explanation:
The most appropriate reason that sales mix decisions should be made using variable costing is that variable costing allows for a clearer analysis of the incremental contribution of each product to the overall profitability. Unlike full costing which includes fixed costs that do not change with the level of production or sales, variable costing focuses on costs that vary directly with production. Therefore, when contemplating the sales mix, it is practical to consider the additional revenue against the additional variable costs exclusively, as these are the costs that will be affected by changing the mix of products sold.
By using variable costing, a firm can better understand which products contribute the most to covering fixed costs and generating profit. This method aligns with making decisions about the profit-maximizing quantity to produce, as it takes into account average variable cost, and marginal cost, which are key for understanding a product's contribution to the firm's overall profits. Thus, variable costing is the preferred method for companies to decide on which mix of products and services will maximize profitability, especially in the long run.