Brasher Company manufactures and sells a single product that has a positive contribution margin. If the selling price and variable expenses both decrease by 5% and fixed expenses do not change, then what would be the effect on the contribution margin per unit and the contribution margin ratio?

Question

Quizplus · Accepted Answer

If the selling price and variable expenses both decrease by 5%, the contribution margin per unit will remain the same, as the 5% decrease applies to both the selling price and variable expenses. However, since the selling price and variable expenses both decrease by the same percentage, the contribution margin ratio would remain unchanged as well. Option B is the only choice that reflects this result.

Brasher Company Manufactures and Sells a Single Product That Has