There is an important relation between contribution margin and profit.Which of the following statements is not true?
A) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.
B) As the number of units sold rises, profit increases by the additional contribution margin per unit.
C) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.
D)All of these ans choices are correct.

Question

There is an important relation between contribution margin and profit.Which of the following statements is not true?
A) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.
B) As the number of units sold rises, profit increases by the additional contribution margin per unit.
C) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same. 
D)All of these ans choices are correct.

Quizplus · Accepted Answer

All of the answer choices are correct, therefore none of them are not true. The relation between contribution margin and profit is that profit is equal to total revenue minus total costs (including fixed costs), and contribution margin is equal to total revenue minus variable costs. As contribution margin increases, so does profit, assuming all other factors remain constant. Likewise, as the number of units sold increases, contribution margin and profit will also increase.

There Is an Important Relation Between Contribution Margin and Profit