Company A and Company B sell their products for exactly the same sales price.Both have the same annual total costs.Company A's variable and fixed costs at break-even total $60,000 and $30,000 respectively.Company B's variable and fixed costs at break-even total $30,000 and $60,000 respectively.Both companies have the same net income.If both companies experience an increase in sales, which company will have the higher net income?

Question

Quizplus · Accepted Answer

Company B will have the higher net income because its variable costs are lower, meaning it will have a higher contribution margin per unit. As sales increase, Company B will have a higher profit due to its higher contribution margin.

Company a and Company B Sell Their Products for Exactly