A Firm Selling Three Products Has the Following Data

question 89

Multiple Choice

A firm selling three products has the following data: If the firm can change the sales mix from 60,000 P, 40,000Q, and 20,000 R to 60,000 P, 20,000 Q, and 40,000 R, pretax profit will be

• A) Lower
• B) Higher
• C) Unchanged
• D) Cannot be determined

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses, and profits or losses over a specific period of time.

Relationship of Net Income to Net Sales

A profitability metric that measures the percentage of net sales that ultimately becomes net income, indicating the efficiency of a company in generating profit from sales.

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from total revenue.

Net Sales

This refers to the revenue generated from sales after deducting returns, allowances for damaged or missing goods, and discounts.