Multiple Choice Question
In Year 1, a company sold 4,000 units each of Product A and Product B. For products A and B, the selling prices were $10 and $15, respectively. Also, the variable expenses were $8 and $10, respectively. The fixed expenses of the company amounted to $20,000. The company's average contribution margin ratio was 0.28, and the operating income was $8,000. In Year 2, the company was able to sell 6,000 units of Product A and 2,000 units of Product B. There was no change in the selling price, variable expenses, and the fixed expenses in Year 1. Based on the scenario, identify a true statement about the company's average contribution margin ratio.
O The company's average contribution margin ratio increased by 0.40 in Year 2.
O The company's average contribution margin ratio increased by 0.04 in Year 2.
O The company's average contribution margin ratio decreased by 0.40 in Year 2.
O The company's average contribution margin ratio decreased by 0.04 in Year 2.