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)As the number of

Question

Quizplus · Accepted Answer

The statement in option D is incomplete and does not provide enough information to determine its truthfulness. The full statement should be "As the number of units sold decreases, profit decreases by the amount of the contribution margin per unit multiplied by the decrease in units sold." This statement represents the impact of decreases in sales volume on profit and contribution margin. It is true that as sales volume decreases, total contribution margin decreases while fixed costs remain the same, resulting in lower profits. Therefore, options A, B, and C are all true statements about the relationship between contribution margin and profit.

There Is an Important Relation Between Contribution Margin and Profit