Question

Terry's Trees has reached its break-even point and has calculated its contribution margin ratio to be 70%. For each $1 increase in sales: net operating income will increase by $0.30 total contribution margin will increase by $0.30 total contribution margin will increase by $0.70 net operating income will increase by $0.70

Answer 1

total contribution margin will increase by $0.70

net operating income will increase by $0.70

Answer 2

If the contribution margin ratio is 70% it means that for each $1 increase in sales the total contibution margin will increase by $0.70

Step-by-step explanation:

The contribution margin ratio is calculated when you deduct from the price the variables costs, so the other part (contribution margin) is used to cover the fixed costs and when they are covered too, there are income. It happens when you are above break-even point. You cover all variable and fixed costs.