1. What is meant by a product's contribution margin ratio? How is this ratio useful in planning business operations? Give an example of a company and specific items that might go into the calculation of the contribution margin. Can break-even sales be calculated by using contribution ratio?
2. What arguments can be advanced in favor of treating fixed manufacturing overhead costs as product costs? What arguments can be advanced in favor of treating fixed manufacturing overhead costs as period costs? Which arguments do you find to be the most valid? Explain.
The cited solution carefully explains the concepts together with examples as needed.