Product Mix Answer
Review > Practice Problems > Product Mix
Product mix refers to the total number of product lines a company offers to its customers. It is also known as product assortment or product portfolio. A product line is a group of related products under a single brand sold by the same company. Understanding a company's product mix involves analyzing the various products it sells and their relative proportions in terms of sales volume or revenue.
The product mix is typically described in terms of its:
Width: The number of different product lines the company carries.
Length: The total number of items within its product lines.
Depth: The number of versions offered for each product in the line.
Consistency: How closely related the various product lines are in terms of production requirements, distribution channels, or other factors.
Analyzing the product mix is crucial for strategic business decisions. It helps management understand which products are performing well, identify opportunities for growth, optimize resource allocation (e.g., marketing, production), and manage inventory effectively. By understanding the contribution of each product to overall sales and profitability, businesses can make informed decisions about product development, pricing, promotion, and distribution strategies.
Practice Problem: TechGadget Co.'s Product Mix Analysis
| Products | Product Units Sold | Sales Value |
| Smart Watch | 1,500 | 375,000 |
| Wireless Earbuds Pro | 2,200 | 220,000 |
| Portable Speaker Mini | 3,000 | 150,000 |
| VR Headset Elite | 500 | 250,000 |
| Smart Home Hub | 90,000 | 90,000 |
| Gaming Mouse | 75,000 | 75,000 |
| Mechanical Keyboard | 1,200 | 120,000 |
| Webcam HD | 80,000 | 80,000 |
| USB Docking Station | 800 | 160,000 |
| External SSD 2TB | 1,000 | 100,000 |
| Total | 18,500 | 1,620,000 |
Problem: Calculate TechGadget Co.'s product mix for the last fiscal quarter, expressed as a percentage of total units sold and as a percentage of total sales value.
Step-by-Step Solution
Calculate Total Units Sold: Sum the units sold for all products: 1,500 + 2,200 + 3,000 + 500 + 1,800 + 2,500 + 1,200 + 4,000 + 800 + 1,000 = 18,500 units
Calculate Total Sales Value: Sum the sales value for all products: $375,000 + $220,000 + $150,000 + $250,000 + $90,000 + $75,000 + $120,000 + $80,000 + $160,000 + $100,000 = $1,620,000
Calculate Product Mix by Units: For each product, divide its units sold by the total units sold and multiply by 100 to get a percentage.
Smartwatch X1: (1,500 / 18,500) * 100% = 8.11%
Wireless Earbuds Pro: (2,200 / 18,500) * 100% = 11.89%
Portable Speaker Mini: (3,000 / 18,500) * 100% = 16.22%
VR Headset Elite: (500 / 18,500) * 100% = 2.70%
Smart Home Hub: (1,800 / 18,500) * 100% = 9.73%
Gaming Mouse G5: (2,500 / 18,500) * 100% = 13.51%
Mechanical Keyboard K9: (1,200 / 18,500) * 100% = 6.49%
Webcam HD: (4,000 / 18,500) * 100% = 21.62%
USB-C Docking Station: (800 / 18,500) * 100% = 4.32%
External SSD 1TB: (1,000 / 18,500) * 100% = 5.41%
Total 118,500 100.00%
Calculate Product Mix by Sales Value: For each product, divide its sales value by the total the total sales value and multiply by 100 to get a percentage
Smartwatch X1: (375,000 / 1,620,000) * 100% = 23.15%
Wireless Earbuds Pro: (220,000 / 1,620,000) * 100% = 13.58%
Portable Speaker Mini: (150,000 / 1,620,000) * 100% = 9,26%
VR Headset Elite: (250,000 / 1,620,000) * 100% = 15.43%
Smart Home Hub: (90,000 / 1,620,000) * 100% = 5.56%
Gaming Mouse G5: (75,000 / 1,620,000) * 100% = 4.63%
Mechanical Keyboard K9: (120,000 / 1,620,000) * 100% = 7.41%
Webcam HD: (80,000 / 1,620,000) * 100% = 4.94%
USB-C Docking Station: (160,000 / 1,620,000) * 100% = 9.88%
External SSD 1TB: (100,000 / 1,620,000) * 100% = 6.17%
Total 1,620,000 100.00%