If the Selling Price Per Unit and the Variable Cost

question 75

Short Answer

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? $\begin{array}{ll}\text { Contribution margin per unit }&\text { Contribution margin ratio }\\\hline\text { a) Increase } & \text { Increase } \\\text { b) Increase } & \text { No effect } \\\text { c) Decrease } & \text { No effect } \\\text { d) Decrease } & \text { Increase }\end{array}$

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Definitions:

Recognized Gain

is the portion of a gain that is subject to taxation under the tax laws after the sale or exchange of an asset.

Basis

The original value or cost of an asset or investment for tax purposes, crucial for calculating gain or loss on disposition.

Like-Kind Exchange

A tax deferment strategy where an asset is exchanged for another similar asset, deferring capital gains taxes.

Identified

Specified or determined, often used in contexts where certain items, transactions, or options are selected for specific treatment or action.