When the Variable Cost Ratio Decreases, The

question 65

Multiple Choice

When the variable cost ratio decreases, the:

• A) Contribution margin as a percentage of net sales increases
• B) Contribution margin as a percentage of net sales decreases
• C) Break-even point increases
• D) Fixed cost per unit increases

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Definitions:

Net Realizable Value

The estimated selling price of goods minus the cost of their sale or disposal, reflecting the actual cash value of inventory.

Accounts Receivable

The sum customers owe a corporation for goods or services delivered but not yet compensated.

Credit Balance

A situation in an account where the sum of credits exceeds the sum of debits.

Contra-Asset

An asset account where its balance is a negative figure, offsetting the balance of a related asset account.