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When the actual mix of products sold shifts in favor of the high-contribution-margin product group, what is the impact on the total sales-mix variance and the total sales-volume variance?

a) The total sales-mix variance is unfavorable, and the total sales-volume variance is unfavorable.
b) The total sales-mix variance is favorable, and the total sales-volume variance is favorable.
c) The total sales-mix variance is favorable, and the total sales-volume variance is unfavorable.
d) The total sales-mix variance is unfavorable, and the total sales-volume variance is favorable.

1 Answer

3 votes

Final answer:

A shift in favor of high-contribution-margin products leads to a favorable sales-mix variance as higher margin products comprise a larger proportion of sales. The sales-volume variance, however, is not directly affected by the mix and instead depends on the actual quantity sold versus the expected quantity.

Step-by-step explanation:

When the actual mix of products sold shifts in favor of the high-contribution-margin product group, the impact on the total sales-mix variance and the total sales-volume variance can be analyzed separately. The sales-mix variance is favorable because selling a higher proportion of high-contribution-margin products leads to a higher overall margin than expected if the mix had stayed the same. Conversely, the sales-volume variance primarily considers the quantity sold against the expected quantity, regardless of the mix. If more units are sold than expected, this variance would be favorable, if fewer, it would be unfavorable. However, the shift in mix to more profitable products doesn't inherently indicate a change in total quantity, so the effect on sales-volume variance is not directly indicated by a shift in mix.

Therefore, with the increased proportion of high-contribution-margin products in the sales mix, the correct answer is that the total sales-mix variance is favorable, and the effect on the total sales-volume variance is not directly determined by the information provided about the product mix shift alone.

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