Product Mix and Sales Mix Affect Profit

There have been several examples showing how customers, volume, and low-margin versus high-margin products and services affect profit and margin.

Customers affect profit and margin by the amount of indirect costs they require or the volume of sales they generate for the company.

Higher volume increases profit and margin as long as contribution margin is positive.

High-profit products and services will increase profit faster than low-profit products and services.

A corollary to the last point is that a greater proportion of higher-profit products and services among total sales will increase profit. This first example of Padco’s 2010 income statement, Figure 45, has Product A at 35% of sales, B at ...

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