Anish Company produces pins for business fraternities. The company is considerin

Question

Anish Company produces pins for business fraternities. The company is considering decreasing its print and radio advertising on college campuses by $20,000 next year. The company is also considering lowering the selling price to stimulate demand, and expects sales to double next year. What will be the result of these actions taken together?

Decrease the unit variable costs, decrease the fixed costs, increase the contribution margin ratio

Explanation / Answer

Answer is

Decrease the unit contribution margin, decrease the contribution margin ratio, decrease the fixed costs

Decrease in sale price will decrease the contribution margin and consequently decrese in contribution margin ratio.

Question also specifies the reduction in fixed cost.

Therefore last option is correct.

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