When will the contribution margin ratio increase?
A)when the break-even point increases.
B)when the break-even point decreases.
C)when the variable expenses as a percentage of sales decrease.
D)when the variable expenses as a percentage of sales increase.

Question

Quizplus · Accepted Answer

Contribution margin ratio increases when the variable expenses as a percentage of sales decrease. It indicates that the business is generating more profit from each sale, which is a positive sign. Both A and D are incorrect as they indicate negative effects on contribution margin ratio. B does not necessarily affect contribution margin ratio.

When Will the Contribution Margin Ratio Increase