Each of a company\'s several product lines has a different contribution margin r

Question

Each of a company's several product lines has a different contribution margin ratio. Total sales in 2017 were 20% higher than total sales in 2016. Total contribution margin for 2017 will be:

A: the same as it was in 2016, regardless of changes in sales mix.

B: less than 20% higher than it was in 2016, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2017 than in 2016.

C: 20% higher than it was in 2016, regardless of changes in sales mix.

D: more than 20% higher than it was in 2016, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2017 than in 2016.

Each of a company's several product lines has a different contribution margin ratio. Total sales in 2017 were 20% higher than total sales in 2016, Total contribution margin for 2017 will be O O the same as it was in 2016, regardless of changes in sales mix. less than 20% higher than it was in 2016 if the sales mix changes and propor sold in 2017 than in 2016. onately more high contribu ma gin at o ro c are ?20% higher than it was in 2016, regardless of changes in sales mix. more than 20% higher than it was in 2016, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2017 than in 2016.

Explanation / Answer

The right answer is Option (D) more than 20% higher than it was in 2016, if the sales mix changes and proportionately more high contribution margin ratio products are sold in 2017 than in 2016.

Justification:

If sales are increased by 20%, contribution margin also increases by same percentage.

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