For a given level of sales,a low contribution margin ratio will produce less net operating income than a high contribution margin ratio.

Question

Quizplus · Accepted Answer

The contribution margin ratio represents the amount of revenue that is available to cover fixed costs and contribute to net operating income. A low contribution margin ratio means that a smaller percentage of revenue is available to cover fixed costs and contribute to net operating income. Therefore, for a given level of sales, a low contribution margin ratio will produce less net operating income than a high contribution margin ratio.

For a Given Level of Sales,a Low Contribution Margin Ratio