There is an important relationship between contribution margin and profit.Which of the following statements is not true?
A)As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.
B)As the number of units sold rises, profit increases by the additional contribution margin per unit.
C)As the number of units sold increases, total contribution margin and fixed costs increase.
D)As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

Question

Quizplus · Accepted Answer

This statement is not entirely true as fixed costs remain constant regardless of the number of units sold. However, as the number of units sold increases, the total contribution margin will increase, which can cover the fixed costs and thus increase profit.

There Is an Important Relationship Between Contribution Margin and Profit