3 ALL OTHER THINGS EQUAL, COMPANY B, WITH ITS HIGHER FIXED COSTS AND...

6-3 All other things equal, Company B, with

its higher fixed costs and lower variable costs,

units or dollar sales.

will have a higher contribution margin ratio.

In the contribution margin method, total

Therefore, it will tend to realize the most rapid

fixed cost is divided by the contribution margin

per unit to obtain the break-even point in units.

increase in contribution margin and in profits

Alternatively, total fixed cost can be divided by

when sales increase.

the contribution margin ratio to obtain the

break-even point in sales dollars.