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13 Dec 2019
Which of the following statements is correct?
a) Shifting sales mix from low-margin items to high-margin items will decrease total company profits even though total sales increase.
b) For two companies making the same product with similar total sales and expenses, the contribution margin will be lower in the company with the higher proportion of fixed expenses in its cost structure.
c) The smaller the contribution margin ratio, the smaller the amount of sales is needed to cover a given amount of fixed expenses.
d) A company with high operating leverage will experience a larger reduction in profit in a period of declining sales than a company with low operating leverage.
Which of the following statements is correct?
a) Shifting sales mix from low-margin items to high-margin items will decrease total company profits even though total sales increase.
b) For two companies making the same product with similar total sales and expenses, the contribution margin will be lower in the company with the higher proportion of fixed expenses in its cost structure.
c) The smaller the contribution margin ratio, the smaller the amount of sales is needed to cover a given amount of fixed expenses.
d) A company with high operating leverage will experience a larger reduction in profit in a period of declining sales than a company with low operating leverage.
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