As sales exceed the break-even point,a firm with a high contribution-margin percentage ________.
A)increases profits faster than does a firm with a low contribution-margin percentage
B)increases profits at the same rate as a firm with a low contribution-margin percentage
C)decreases profits at the same rate as a firm with a low contribution-margin percentage
D)increases profits slower than does a firm with a low contribution-margin percentage

Question

Quizplus · Accepted Answer

A high contribution-margin percentage means that a larger portion of each dollar of sales revenue is contributing to covering fixed costs and generating profit. As sales exceed the break-even point, the firm with a high contribution-margin percentage will see a greater increase in profits compared to a firm with a lower contribution-margin percentage. Therefore, option A is the correct choice.

As Sales Exceed the Break-Even Point,a Firm with a High