Question

Which of the following is true regarding the contribution margin ratio of a single-product company?

A. The contribution margin ratio increases as the number of units sold increases.
B. The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin pa unit.
C. As fixed expenses decrease, the contribution margin ratio increases.
D. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

Answer 1

The correct statement regarding the contribution margin ratio of a single-product company is option D: If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

Step-by-step explanation:

The correct statement regarding the contribution margin ratio of a single-product company is option D: If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

The contribution margin ratio is used to determine how much profit a company makes on each unit sold. It is calculated by dividing the contribution margin (which is the difference between sales revenue and variable expenses) by the sales revenue.

So, if sales increase, the dollar increase in net operating income can be calculated by multiplying the contribution margin ratio by the dollar increase in sales.