Assume that only the specified parameters change in a sensitivity analysis.The contribution margin ratio increases when:
A)total capacity-related (fixed)costs increase.
B)total capacity-related (fixed)costs decrease.
C)flexible (variable)costs per unit increase.
D)flexible (variable)costs per unit decrease.

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated by subtracting the variable costs per unit from the selling price per unit and dividing by the selling price per unit. As such, if the flexible (variable) costs per unit decrease, the contribution margin ratio will increase.

Assume That Only the Specified Parameters Change in a Sensitivity