Assuming a company has net income,which of the following statements is true regarding the contribution margin per unit?

Question

Quizplus · Accepted Answer

The contribution margin per unit indicates the amount of each unit's sale that contributes towards covering the company's fixed costs and generating profit. As the number of units sold increases, the total contribution margin will increase, but the contribution margin per unit will remain constant. Therefore, option A is incorrect. Decreasing the number of units sold will lead to a decrease in both total and per-unit contribution margin; hence, option B is also incorrect. Option D is incorrect because the contribution margin per unit does not measure the decrease in variable costs with any additional unit's sale; instead, it measures the amount of each unit's sale that contributes towards covering the fixed costs and generating profit. Option C is correct because the increase in the number of units sold will directly improve the company's revenue, leading to an increase in the net income by a corresponding amount, which is equal to the contribution margin per unit.

Assuming a Company Has Net Income,which of the Following Statements