Croc Catchers calculates its contribution margin to be less than zero.Which statement is true?
A)Its fixed costs are less than the variable cost per unit.
B)Its profits are greater than its total costs.
C)The company should sell more units.
D)Its selling price is less than its variable costs.

Question

Quizplus · Accepted Answer

A negative contribution margin indicates that the selling price is less than the variable costs. Therefore, D is the correct answer. A is incorrect because if fixed costs were less than the variable cost per unit, the contribution margin would still be positive. B is incorrect because if the contribution margin is negative, profits cannot be greater than total costs. C is also incorrect because selling more units would not be profitable if the contribution margin is negative.

Croc Catchers Calculates Its Contribution Margin to Be Less Than