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

Question

Quizplus · Accepted Answer

A high contribution margin ratio means that a larger portion of sales revenue is available to cover fixed costs and contribute to net operating income. Therefore, a high contribution margin ratio will typically produce more net operating income than a low contribution margin ratio for a given level of sales.

For a Given Level of Sales, a Low Contribution Margin