Answer:
C. increase by about 6 percent.
Explanation:
Since,
[tex]\text{Contribution margin ratio}=\frac{\text{Sales-Variable expenses}}{\text{Sales}}[/tex]
Sales = $ 120,
Original expenses = $ 65
Thus, contribution margin ratio = [tex]\frac{120-65}{120}=\frac{55}{120}=0.4583\approx 0.46[/tex]
New expenses = $ 58,
Thus, contribution margin ratio = [tex]\frac{120-58}{120} = \frac{62}{120}=0.5166\approx 0.52[/tex]
∵ 52 - 46 = 6,
Hence, the CMR is increased by 6%.
OPTION C is correct.
