The Smaller the Contribution Margin Ratio, the Smaller the Amount

question 124

True/False

The smaller the contribution margin ratio, the smaller the amount of sales required to cover a given amount of fixed expenses.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or sales, remaining constant regardless of the business activity level.

Contribution Margin

The selling price per unit, minus the variable cost per unit, indicating how much of each sale contributes to covering fixed costs.

Rapidly Changing Technology

Rapidly changing technology refers to the swift advancement in technological innovations and developments that can significantly affect industries and markets.

Soft Rationing

The limitation of capital due to internal policies of a company, not directly involving actual shortages or external financial conditions.