Explain why different costs and revenues may be relevant when making short-term product mix decisions compared...

Explain why different costs and revenues may be relevant when making short-term product mix decisions compared with making long-term product mix decisions?

Expert Solution

Product mix refers to the Total of products that a firm produce. Every company usually deals with short term product mix decisions so good decisions in context of product mix should be taken. Hence, Cost is the main critical point of control to be taken into consideration. What we cost the product is a matter of our profitability that leads to revenue of the firm.

Hence, revenue is to be matched with the expenses of a firm to create profit. Hence, both cost and revenues are considered as important profitability point regarding short-term decision making.

Whereas, long term decisions are affected by many factors, other than cost and revenue. A basis assumption to be taken into consideration is that the best decision is that which involves the most revenue or the least cost. But short-term influence more of cost and less of other factors. Hence, Cost and revenue have more importance in short term than long term.

ekkarill92 answered 2 years ago

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