Expressing contribution margin as a percentage of sales A. is particularly useful to multiproduct firms. B....

Expressing contribution margin as a percentage of sales

	A.	is particularly useful to multiproduct firms.
	B.	prohibits a company from calculating break-even.
	C.	is easier using calculus
	D.	is encouraged when a company has large fixed costs.
	E.	is not possible if variable cost per unit is constant.

Expert Solution

Contribution margin as a percentage of sales is used by the company to calculate the break even sales and also it can be calculated on a normal calculator. Moreover contribution margin as a percentage of sale also known as contribution margin ratio is possible even if the variable cost per unit is constant as it is the difference between the selling price and the variable cost per unit.

Every company has a single product it is useful because the ratio provide the information regarding how much contribution margin is earn in order to cover the fixed cost. Therefore company which has a larger fixed cost are more helpful from this ratio as this give the information regarding the contribution margin on to cover the fixed cost.

More the contribution margin ratio better will be the position of the firm as it depicts that the company is able to cover it's all fixed cost.

Therefore the correct option is D

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ekkarill92 answered 2 years ago

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