If the fixed expenses of a product increase while variable expenses and the selling price remain constant,what will happen to the total contribution margin and the break-even point?
A) Option A
B) Option B
C) Option C
D) Option D

Question

If the fixed expenses of a product increase while variable expenses and the selling price remain constant,what will happen to the total contribution margin and the break-even point? 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

If fixed expenses increase while variable expenses and the selling price remain constant, the total contribution margin will decrease as the overall profit per unit sold will be reduced. As a result, the break-even point will increase because more units will have to be sold to cover the higher fixed expenses. Option C shows a decrease in the contribution margin and an increase in the break-even point, which is the expected outcome. Option A and B show a decrease in the contribution margin but no change in the break-even point, which is incorrect. Option D shows an increase in the contribution margin and a decrease in the break-even point, which is not true when fixed expenses increase.

If the Fixed Expenses of a Product Increase While Variable