If the selling price per unit and the variable cost per unit both increase by 5%, what is the effect on the contribution margin per unit and on the contribution margin ratio? Contribution margin per unit Contribution margin ratio

Question

Quizplus · Accepted Answer

If both the selling price per unit and the variable cost per unit increase by the same proportion (in this case, 5%), the contribution margin per unit remains unchanged. Therefore, the contribution margin ratio (contribution margin per unit/selling price per unit) also remains unchanged. The correct option is B, which states that there will be an increase in neither the contribution margin per unit nor the contribution margin ratio.

If the Selling Price Per Unit and the Variable Cost