In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be higher in the company with a higher proportion of fixed expenses in its cost structure.

Question

Quizplus · Accepted Answer

This is because a higher proportion of fixed expenses means that the variable expenses are lower. This, in turn, leads to a higher contribution margin ratio, which is the percentage of revenue that contributes to covering fixed costs and generating profit.

In Two Companies Making the Same Product and with the Same