If the Total Contribution Margin Increases and Fixed Costs Do

question 88

Multiple Choice

If the total contribution margin increases and fixed costs do not change, pre-tax profit:

• A) decreases by an equal amount.
• B) increases by an equal amount.
• C) does not change.
• D) increases by some other amount.

---

Definitions:

FOB Shipping Point

FOB Shipping Point is a freight term indicating that the buyer assumes responsibility for the goods and the cost of shipping the moment the goods leave the seller’s premises.

Perpetual Inventory System

An approach in accounting that captures transactions related to inventory purchases or sales the moment they occur, facilitated by digital point-of-sale systems and enterprise asset management applications.

Periodic Inventory System

A method of inventory management where updates to inventory levels are made periodically at the end of an accounting period, rather than continuously.

Inventory Shrinkage

The loss of products between point of manufacture or purchase from supplier and point of sale, often due to theft, damage, or administrative errors.