Suppose the contribution margin ratio increases.What will be the effect on the break-even point in sales dollars?
A)The dollar value will increase.
B)The dollar value will decrease.
C)The dollar value will remain the same.
D)The dollar value will double.

Question

Quizplus · Accepted Answer

An increase in the contribution margin ratio means that each unit sold contributes more towards covering fixed expenses and generating profits. This reduces the break-even point in sales dollars as it takes fewer sales to cover the fixed expenses and reach the point of generating profits. Therefore, the dollar value will decrease.

Suppose the Contribution Margin Ratio Increases