A major benefit of using a contribution ratio format is that
A)it supports management's decision on its sales mix.
B)it assists in determining the effect of sales on operating income.
C)variable costs are isolated and can be easily reduced.
D)it shows the impact of fixed costs on the sales mix.

Question

Quizplus · Accepted Answer

The contribution ratio format shows the contribution margin as a percentage of sales, making it easier to determine the effect of sales on operating income. This helps management make decisions regarding their sales mix and pricing strategies. While variable costs are isolated, it does not necessarily mean they can be easily reduced. The impact of fixed costs is also shown, but not directly related to the benefit of using the contribution ratio format.

A Major Benefit of Using a Contribution Ratio Format Is