Given a constant contribution margin per unit and constant fixed costs,the period-to-period change in operating profit under variable costing is driven solely by:
A)changes in the quantity of units actually sold.
B)changes in ending inventory.
C)changes in the quantity of units produced.
D)changes in sales price per unit.

Question

Quizplus · Accepted Answer

Under variable costing, fixed costs are considered period costs and are expensed during the period incurred. Therefore, the period-to-period change in operating profit is driven solely by changes in the quantity of units actually sold, as this directly affects the contribution margin per period. Changes in ending inventory do not affect operating profit under variable costing, as they only impact the timing of when costs are recognized. Changes in the quantity of units produced also do not impact operating profit, as fixed costs are not affected by production quantities. Changes in sales price per unit may impact revenue, but the constant contribution margin per unit assumption means that this does not impact operating profit.

Given a Constant Contribution Margin Per Unit and Constant Fixed