Which of the following statements is correct about the relationship of the CVP factors?

Question

Quizplus · Accepted Answer

The statement "Sales volume contributes to more profit at higher volumes" is correct. This is because as sales volume increases, the fixed costs are spread over a larger number of units, resulting in a lower per-unit fixed cost. This leads to higher contribution margin per unit, and therefore more profit at higher volumes. Option A is incorrect because it is not true that variable costs are always more than fixed costs. Option B is incorrect because demand can be stronger at lower prices in certain contexts like market penetration pricing. Option D is incorrect because sales prices at lower volumes may not always contribute to higher contribution margins, particularly if price discounts are offered to incentivize customers to make purchases.

Which of the Following Statements Is Correct About the Relationship