Question

What is meant by the term sales mix? What assumption is usually made concerning sales mix in CVP analysis?

PLEASE BE VERY DETAILED :)

Answer 1

A sales mix is ​​a type of calculation in which the business determines the quantity of each product sold relative to the total sales. The sales mix is ​​very important because a certain amount of products and services can be more profitable than anything else. The sales mix is ​​an alternative to increasing the profitability of the business.

The analyst uses the company's sales mix to determine the company's overall profit growth potential. If profits at one point go down, then sales of a product that is low in business profits may be down. And more profit is focused on increasing the sales of the product.

Sales mix is ​​calculated by dividing the sales of each product on the percentage of complete products that the company has. CVP analysis has the following assumptions about sales mix: sales volume is stable. If there is a slight change in volume, the selling price does not change. Costs are easily divided into fixed costs. Variable cost units are determined in terms of their number and fixed costs are always fixed in nature. Sales mix is ​​a constant in the business of producing more products.