The greater the ratio of variable costs to sales, the:
A)more each additional sale contributes to coverage of fixed costs.
B)lower the level of profitability.
C)more units must be sold to cover fixed costs.
D)lower the benefit of conducting a sensitivity analysis.

Question

Quizplus · Accepted Answer

The greater the ratio of variable costs to sales, the more units must be sold to cover fixed costs. This is because a higher proportion of each sale goes towards covering variable costs, leaving less contribution margin to cover fixed costs.

The Greater the Ratio of Variable Costs to Sales, The