All else constant, as the variable cost per unit increases, the:
A)contribution margin decreases.
B)sensitivity to ﬁxed costs decreases.
C)degree of operating leverage decreases.
D)operating cash ﬂow increases.
E)net proﬁt increases.

Question

Quizplus · Accepted Answer

Contribution margin is defined as the difference between the selling price per unit and the variable cost per unit. If the variable cost per unit increases, the contribution margin will decrease. This is because there will be less revenue left over after accounting for the increased variable costs.

All Else Constant, as the Variable Cost Per Unit Increases