Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?
A) As fixed expenses decrease, the contribution margin ratio increases.
B) The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.
C) The contribution margin ratio will decline as unit sales decline.
D) The contribution margin ratio equals the selling price per unit less the variable expense ratio.

Question

Quizplus · Accepted Answer

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit for a company that produces only a single product. This means that as the selling price per unit or the contribution margin ratio increases, the contribution margin per unit will also increase. Fixed expenses do not directly affect the contribution margin ratio. The contribution margin ratio is a percentage and does not change as unit sales decline. The formula for the contribution margin ratio is (selling price per unit - variable expenses per unit) ÷ selling price per unit.

Which of the Following Is True Regarding the Contribution Margin