If the sale price per unit decreases and variable costs remain the same, what will be the effect on the contribution margin ratio?

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated as contribution margin divided by sales. If the sale price per unit decreases while variable costs remain the same, the contribution margin per unit will decrease. As a result, the contribution margin ratio will decrease because the contribution margin as a percentage of sales will decrease.

If the Sale Price Per Unit Decreases and Variable Costs