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?
A)Option A
B)Option B
C)Option C
D)Option D

Question

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? 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

If both selling price and variable expenses decrease by 5%, the contribution margin per unit and contribution margin ratio will not change. This is because both the numerator and denominator of the contribution margin ratio decrease by the same percentage, resulting in no net effect on the ratio. Therefore, option B is the best choice.

Brasher Company Manufactures and Sells a Single Product That Has