In the initial diagnosis of a profit problem, we usually start from two main buckets: revenue and cost. Some experts advice putting “mix effect” as an additional bucket, while some suggest discussing “mix effect” within the cost bucket (i.e. segments with higher cost relative to revenue has increased). However, the mix effect could also be discussed within “revenue” bucket (i.e. segments with higher revenue relative to cost has reduced).
Could you share your opinion on (1) which approach is better and more logical? (2) If the second approach is suggested, should I discuss the mix effect within the revenue or cost bucket?
Thank you!