Under the contribution income statement, a company's contribution margin will be: A. Higher if fixed SG&A costs decrease. B. Higher if variable SG&A costs increase. C. Lower if fixed manufacturing overhead costs decrease. D. Lower if variable manufacturing overhead costs increase.

Question

Derick Garrett

Mathematics

29 December, 00:57

Under the contribution income statement, a company's contribution margin will be: A. Higher if fixed SG&A costs decrease. B. Higher if variable SG&A costs increase. C. Lower if fixed manufacturing overhead costs decrease. D. Lower if variable manufacturing overhead costs increase.

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Answers (1)

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Elyse Keith · Answer 1

Correct option is (D)

Step-by-step explanation:

Contribution is computed as total sales less variable expenses. Contribution margin will increase if sales generated is more than variable expenses and vice-versa.

Fixed expenses are not considered in calculation of contribution. Option A and C are incorrect as fixed expenses are not considered.

Option B is incorrect as contribution margin will not be lower if variable selling, general and administrative (S, G &A) expenses increase.

Therefore, contribution margin will be lower is manufacturing overhead costs increase.