Answer:
If products with a higher contribution margin increase their weight in a company's sales mix, that will lead to a higher total contribution margin, and a higher operating profit.
Step-by-step explanation:
E.g. a company sells 2 products, and it sells them in equal proportion:
- 100 units of product A, which has a contribution margin per unit of $5
- 100 units of product B, which has a contribution margin per unit of $7
Total contribution margin = $500 + $700 = $1,200
if the sales mix changes, and the sales of product B represent 60% of total sales:
- 80 units of product A, which has a contribution margin per unit of $5
- 120 units of product B, which has a contribution margin per unit of $7
Total contribution margin = $400 + $840 = $1,240