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 ...