If the contribution margin ratio increases, the break-even point in sales dollars will
A) increase.
B) decrease.
C) remain the same.
D) double.

Question

Quizplus · Accepted Answer

If the contribution margin ratio increases, it means that a higher percentage of each sales dollar is contributing towards covering fixed costs and generating profits. This, in turn, means that the break-even point - the level of sales at which total revenue equals total costs - can be achieved with lower sales volume. Thus, as the contribution margin ratio increases, the break-even point in sales dollars will decrease.

If the Contribution Margin Ratio Increases, the Break-Even Point in Sales