What is the result when the contribution margin ratio increases?
A) break-even point decreases
B) variable cost ratio increases
C) fixed costs will decrease
D) (variable cost ratio + contribution margin ratio) will be greater than 100%

Question

Quizplus · Accepted Answer

When the contribution margin ratio increases, the break-even point decreases. This is because the contribution margin ratio represents the percentage of each sale that contributes to covering fixed costs and generating profit. Therefore, the higher the contribution margin ratio, the lower the sales volume required to break even.

What Is the Result When the Contribution Margin Ratio Increases