For every unit that a company produces and sells above the breakeven point,its profitability is improved (ignoring taxes)by the unit's
A)gross margin.
B)selling price minus fixed cost.
C)variable cost.
D)contribution margin.

Question

Quizplus · Accepted Answer

The contribution margin is the amount that each unit contributes towards covering the fixed costs and generating a profit. Therefore, for every unit sold above the breakeven point, the profitability is improved by the unit's contribution margin. A and B are incorrect because Gross Margin and Selling Price minus Fixed Cost do not fully consider the variable costs associated with each unit. C is incorrect because simply subtracting variable cost does not take into account the effect of fixed costs on profitability.

For Every Unit That a Company Produces and Sells Above