What happens to the contribution margin if fixed expenses decrease while variable cost per unit remain constant.
A)Contribution margin will be unchanged.
B)Contribution margin will be higher.
C)Contribution margin will be lower.
D)Cannot determine the change.

Question

Quizplus · Accepted Answer

The contribution margin is calculated as sales revenue minus variable costs. It does not change with a decrease in fixed expenses because it is solely concerned with variable costs and sales revenue.

What Happens to the Contribution Margin If Fixed Expenses Decrease