If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars)decrease,what will be the effect on the contribution margin ratio and the break-even point,respectively? $$\begin{array} { | c | c | c | }
\hline & \text { Contribution Margin Ratio } & \text { Break-eren Point } \
\hline \text { A. } & \text { Decreased } & \text { Increased } \
\hline \text { B. } & \text { Increased } & \text { Decreased } \
\hline \text { C. } & \text { Decreased } & \text { Decreased } \
\hline \text { D. } & \text { Increased } & \text { Increased } \
\hline
\end{array}$$
A) Option A
B) Option B
C) Option C
D) Option D

Question

If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars)decrease,what will be the effect on the contribution margin ratio and the break-even point,respectively? $$\begin{array} { | c | c | c | } 
\hline & \text { Contribution Margin Ratio } & \text { Break-eren Point } \
\hline \text { A. } & \text { Decreased } & \text { Increased } \
\hline \text { B. } & \text { Increased } & \text { Decreased } \
\hline \text { C. } & \text { Decreased } & \text { Decreased } \
\hline \text { D. } & \text { Increased } & \text { Increased } \
\hline
\end{array}$$
A) Option A
B) Option B
C) Option C
D) Option D

Quizplus · Accepted Answer

If fixed costs decrease, the contribution margin ratio will increase as a higher proportion of each sales dollar goes towards covering variable costs and contributing to profit. If variable costs (as a percentage of sales dollars) decrease, the break-even point will decrease as less sales revenue is needed to cover those variable costs. Therefore, both factors will lead to a more favorable situation for the company in terms of profitability and financial stability.

If the Fixed Costs for a Product Decrease and the Variable