Select the incorrect statement regarding the relationship between cost behavior and profits.
A) A pure variable cost structure offers higher potential rewards.
B) A pure fixed cost structure offers more security if volume expectations are not achieved.
C) In a pure variable cost structure, when revenue increases by $1, so do profits.
D) In a pure fixed cost structure, the unit selling price and unit contribution margin are equal.

Question

Quizplus · Accepted Answer

In a pure fixed cost structure, the unit selling price and unit contribution margin may not be equal. The unit contribution margin is calculated by subtracting the variable costs from the selling price per unit. However, the selling price per unit may include both variable and fixed costs, so it does not necessarily equal the unit contribution margin.

Select the Incorrect Statement Regarding the Relationship Between Cost Behavior