Ask Question
6 September, 21:11

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will: A) decrease the degree of operating leverage. B) decrease the contribution margin. C) have no effect on the break-even volume. D) have no effect on the contribution margin ratio.

+2
Answers (1)
  1. 6 September, 21:39
    0
    A) decrease the degree of operating leverage

    Explanation:

    The contribution margin is

    sales - variable:

    (sales + 2) - (variable + 2) = sales - variable

    no change

    so B is FALSE

    as the contribution margin ratio is:

    (sales - variable) / sales

    this increase will impact the contribution margin ratio.

    (sales + 2 - (variable + 2)) / (sales + 2)

    (sales - variable) / (sales + 2)

    the CMR will decrease.

    so D is FALSE

    the break-even on sales will increase as the CMR decreases

    more units are needed to fullfil the fixed cost

    so C is FALSE

    A) decrease the degree of operating leverage

    ΔEBIT / Δrevenue

    sales increase and the variable cost increases

    a change in the sales revenue will not be as efficient as it was before the degree of leverage will decrease.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will: A) decrease ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers