Assume that only the specified parameters (that is, variables) change in a sensitivity analysis. The contribution margin ratio increases when:

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Quizplus · Accepted Answer

The contribution margin ratio is defined as the contribution margin per unit divided by the selling price per unit. The contribution margin per unit is calculated by deducting the variable cost per unit from the selling price per unit. Therefore, if the variable cost per unit decreases, the contribution margin per unit will increase, resulting in an increase in the contribution margin ratio.

Assume That Only the Specified Parameters (That Is, Variables) Change