In a typical break-even analysis, a firm's fixed-cost contribution per unit:
A) is the assumed selling price per unit minus the variable cost per unit.
B) is the assumed selling price per unit minus the average fixed cost.
C) usually decreases as the quantity produced increases.
D) is total fixed cost divided by the quantity produced.
E) usually increases as the quantity produced increases.

Question

Quizplus · Accepted Answer

The fixed-cost contribution per unit is the amount of revenue from each unit sold that goes towards covering the fixed costs of the firm. It is calculated by subtracting the variable cost per unit from the assumed selling price per unit. This contribution is important in a break-even analysis as it helps the firm determine at what point they will start making a profit, which occurs when the fixed costs are covered. Therefore, the correct answer is A) is the assumed selling price per unit minus the variable cost per unit.

In a Typical Break-Even Analysis, a Firm's Fixed-Cost Contribution Per