What is the result when the contribution margin ratio increases?
A)The variable cost ratio decreases.
B)The break-even point increases.
C)The fixed costs decrease.
D)The price decreases.

Question

Quizplus · Accepted Answer

When the contribution margin ratio increases, it means that the percentage of revenue that is available to cover fixed costs and contribute to profits has increased. This can happen either by increasing the selling price or decreasing the variable costs. Therefore, the variable cost ratio decreases.

What Is the Result When the Contribution Margin Ratio Increases