The relative proportions in which a company's products are sold is referred to as:

• A. Contribution margin
• B. Gross profit
• C. Net sales
• D. Sales mix

Answer: (D)

Verified step by step guidance

1. Understand the concept of 'Sales Mix': It refers to the relative proportions or percentages of a company's total sales that come from each of its products or services. This is important for analyzing profitability and decision-making.
2. Differentiate 'Sales Mix' from other terms: Contribution margin is the amount remaining after deducting variable costs from sales revenue. Gross profit is the difference between sales revenue and the cost of goods sold. Net sales is the total revenue minus returns, allowances, and discounts. None of these terms describe the relative proportions of products sold.
3. Recognize the importance of 'Sales Mix': It helps businesses understand which products contribute most to revenue and profitability, allowing them to focus on high-performing products or adjust strategies for underperforming ones.
4. Apply the concept in financial analysis: To calculate the sales mix, divide the sales of each product by the total sales and express it as a percentage. This provides insight into the contribution of each product to overall sales.
5. Use 'Sales Mix' in decision-making: Companies can use sales mix data to optimize pricing, marketing strategies, and production planning to maximize profitability and align with market demand.