The Blue Company is currently selling its single product for $15.Variable costs are estimated to remain at 70% of the current selling price and fixed costs are estimated to be $4,800 per month.If Blue increases its selling price by 10%,its variable cost ratio will

Question

Quizplus · Accepted Answer

By increasing the selling price by 10%, the company can afford to decrease the variable cost ratio from 70% to 63.6% and still make the same profit margin, which will result in a higher contribution margin per unit. This may allow the company to be more competitive in the market or increase its profit margin. Therefore, option B is the best choice for the company.

The Blue Company Is Currently Selling Its Single Product for $15.Variable