Managerial Accounting (15th Edition)

Published by McGraw-Hill Education
ISBN 10: 007802563X
ISBN 13: 978-0-07802-563-1

Chapter 5 - Cost-Volume-Profit Relationships - Questions - Page 215: 5-3

Answer

Company B will realize a greater increase in profit than company A, since they have higher fixed costs and lower variable costs, meaning they will have a higher contribution margin.

Work Step by Step

Since company B has higher fixed costs and lower variable costs, it will have a higher contribution margin. As a result, it will realize the greatest increase in profit.
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