When variable costing is used, and if selling prices exceed variable expenses and if the unit contribution margins, the sales mix, and fixed costs remain the same, profits move in the same direction as sales.

Question

Quizplus · Accepted Answer

This is correct as variable costing only considers variable expenses in determining the cost of goods sold and does not include fixed costs. Therefore, if sales increase, profits will also increase as long as the unit contribution margins and sales mix remain constant.

When Variable Costing Is Used, and If Selling Prices Exceed