Questions: True or False Question When a company sells multiple products, an increase in total sales always results in an increase in total profits. True False

True or False Question

When a company sells multiple products, an increase in total sales always results in an increase in total profits.
True
False

Transcript text: True or False Question When a company sells multiple products, an increase in total sales always results in an increase in total profits. True False

Solution

Answer

The answer is False.

Explanation

When a company sells multiple products, an increase in total sales does not always result in an increase in total profits. This is because:

Cost Structure: The cost associated with producing and selling products can vary significantly. If the cost of goods sold or operational expenses increase at a rate higher than the sales revenue, profits may not increase.
Product Mix: Different products have different profit margins. An increase in sales of lower-margin products compared to higher-margin products can lead to a situation where total sales increase but total profits do not.
Discounts and Promotions: Companies may increase sales through discounts or promotions, which can reduce the profit margin and potentially lead to lower overall profits despite higher sales volumes.
Market Conditions: External factors such as changes in market demand, competition, or economic conditions can affect profitability independently of sales volume.

Therefore, while increased sales can lead to higher profits, it is not guaranteed and depends on various factors.

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