If a company increases the price of its product by 10% with no change in sales volume,

Question

Quizplus · Accepted Answer

Contribution margin per unit will change. Since the price of the product has increased by 10%, the contribution margin per unit will also increase. This is because the contribution margin is the difference between the selling price and the variable cost per unit, and the selling price has increased while the variable cost per unit remains the same. The total contribution margin may or may not change depending on the total number of units sold. However, fixed cost per unit and total fixed costs are not affected by the increase in price.

If a Company Increases the Price of Its Product by 10