If fixed costs related to a product increase, while variable costs and sales price remain constant, what will happen to the contribution margin?
A) It will not change.
B) It will increase.
C) It will decrease.
D) It will decrease to zero.

Question

Quizplus · Accepted Answer

The contribution margin is calculated as sales revenue minus variable costs. Since fixed costs do not affect this calculation, an increase in fixed costs, with variable costs and sales price remaining constant, will not change the contribution margin.

If Fixed Costs Related to a Product Increase, While Variable