The impact on net operating income of a given dollar change in sales can be computed by applying the contribution margin ratio to the dollar change in sales.

Question

Quizplus · Accepted Answer

This statement is true. The contribution margin ratio represents the percentage of sales revenue that is available to cover fixed expenses and contribute to net operating income. By multiplying the dollar change in sales by the contribution margin ratio, we can determine the corresponding change in net operating income.

The Impact on Net Operating Income of a Given Dollar