In the short run,the greatest increase in profitability will result from increasing sales in those profit centers with the:
A)Highest performance margins.
B)Lowest traceable fixed costs.
C)Highest contribution margin ratios.
D)Highest responsibility margins.

Question

Quizplus · Accepted Answer

In the short run, increasing sales in profit centers with the highest contribution margin ratios will result in the greatest increase in profitability. This is because contribution margin is the difference between sales and variable costs, meaning that a higher contribution margin ratio indicates that a greater proportion of each dollar of sales goes towards covering fixed costs and generating profit. Therefore, increasing sales in profit centers with high contribution margin ratios will have a greater impact on overall profitability.

In the Short Run,the Greatest Increase in Profitability Will Result