In Two Companies Making the Same Product and with the Same

question 99

True/False

In two companies making the same product and with the same total sales and total expenses,the contribution margin ratio will tend to be lower in the company with a higher proportion of fixed expenses in its cost structure.

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Definitions:

Income Ratio

A financial metric used to evaluate a company's profitability by comparing its income to another metric, such as sales or assets, to assess efficiency and performance.

Capital Balance

Capital balance represents the amount of money that stakeholders have invested in a company. This can also refer to the amount of equity a company has.

Replacement Cost

The cost to replace an asset with another of similar function and quality in current market conditions.

Inventory

Items held for sale in the ordinary course of business, or supplies and raw materials that are used in production.