Final answer:
If the variable expense per unit decreases, the contribution margin ratio will increase.
Step-by-step explanation:
If the variable expense per unit decreases, and all other factors remain the same, the contribution margin ratio will increase.The contribution margin ratio is the proportion of each sales dollar that contributes to covering fixed costs and generating profit. It is calculated by dividing the contribution margin (sales revenue minus variable expenses) by sales revenue.When the variable expense per unit decreases, the contribution margin per unit increases, resulting in a higher contribution margin ratio. This is because a smaller proportion of sales revenue is allocated to variable expenses, leaving a larger proportion to cover fixed costs and contribute to profit.The statement that if the variable expense per unit decreases, and all other factors remain the same, the contribution margin ratio will increase is True. The contribution margin is calculated by subtracting variable costs from sales revenue for each unit sold. If variable expenses decrease, the cost of producing each unit reduces, which in turn increases the margin between the sales price and the variable costs. This boosts the contribution margin ratio because now a larger proportion of each sales dollar is available to cover fixed costs and contribute to profits.