The impact on net operating income of a small change in sales for a segment is best predicted by using:
A) the contribution margin ratio.
B) the segment margin.
C) the ratio of the segment margin to sales.
D) net sales less segment fixed costs.

Question

Quizplus · Accepted Answer

The contribution margin ratio is the best predictor of the impact on net operating income of a small change in sales for a segment because it shows the amount of each additional dollar of sales revenue that contributes towards covering fixed costs and increasing net operating income.

The Impact on Net Operating Income of a Small Change