There is an important relation 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 decreases, total contribution margin decreases, but fixed costs remain the same.
D)As the number of units sold falls, profit increases by the additional contribution margin per unit.

Question

Quizplus · Accepted Answer

This statement is not true as when the number of units sold falls, both total contribution margin and profit would decrease as there would be fewer units contributing to the overall revenue. Therefore, profit does not increase when the number of units sold falls.

There Is an Important Relation Between Contribution Margin and Profit