Question

Select the correct statement regarding the contribution margin ratio. Multiple Choice The contribution margin ratio equals contribution margin per unit divided by variable cost per unit. The contribution margin ratio can be calculated using either total amounts or per unit amounts. An increase in variable cost per unit will cause the contribution margin ratio to increase. Total fixed costs divided by the contribution margin ratio equals the break-even point in units

Answer 1

Answer:

The contribution margin ratio can be calculated using either total amounts or per unit amounts.

Explanation:

Contribution margin ratio = $\frac{Contribution\:per\:unit}{Selling\:price\:per\:unit}$

This can even be done by $\frac{Total\:Contribution\:}{Total\:Sales}$

This will calculate contribution as a percentage of Sales, with this margin ratio we get break even sales value, and not the units.

Whenever there is an increase in variable cost it decreases the contribution.

Therefore, correct statement is

The contribution margin ratio can be calculated using either total amounts or per unit amounts.