If the total contribution margin increases and fixed costs do not change, pre-tax profit:
A) decreases by an equal amount.
B) increases by an equal amount.
C) does not change.
D) increases by some other amount.

Question

Quizplus · Accepted Answer

When the total contribution margin increases and fixed costs remain constant, pre-tax profit increases by an amount equal to the increase in the contribution margin. This is because the contribution margin is used to cover fixed costs, and any excess contributes directly to profit.

If the Total Contribution Margin Increases and Fixed Costs Do