Flower Company manufactures and sells a single product that has a positive contribution margin.If the selling price and variable costs both decrease by 5% and fixed costs do not change,then what would be the effect on the contribution margin per unit and the contribution margin ratio? $$\begin{array} { | c | c | c | }
\hline & \text { Contrbution margin per unit } & \text { Contribution margin ratio } \
\hline \text { A. } & \text { Decrease } & \text { Decrease } \
\hline \text { B. } & \text { Decrease } & \text { No change } \
\hline \text { C. } & \text { No change } & \text { Decrease } \
\hline \text { D. } & \text { No change } & \text { No change } \
\hline
\end{array}$$
A) Option A
B) Option B
C) Option C
D) Option D

Question

Flower Company manufactures and sells a single product that has a positive contribution margin.If the selling price and variable costs both decrease by 5% and fixed costs do not change,then what would be the effect on the contribution margin per unit and the contribution margin ratio? $$\begin{array} { | c | c | c | } 
\hline & \text { Contrbution margin per unit } & \text { Contribution margin ratio } \
\hline \text { A. } & \text { Decrease } & \text { Decrease } \
\hline \text { B. } & \text { Decrease } & \text { No change } \
\hline \text { C. } & \text { No change } & \text { Decrease } \
\hline \text { D. } & \text { No change } & \text { No change } \
\hline
\end{array}$$
A) Option A
B) Option B
C) Option C
D) Option D

Quizplus · Accepted Answer

A decrease in selling price and variable costs will lead to a decrease in the contribution margin per unit. However, since fixed costs remain the same, the contribution margin ratio (contribution margin per unit ÷ selling price) will remain unchanged. Option B reflects this scenario, as the contribution margin per unit is lower but the contribution margin ratio remains the same. Options A, C, and D are incorrect as they do not reflect this outcome.

Flower Company Manufactures and Sells a Single Product That Has