If Selling Price Per Unit and Unit Variable Cost Increase

question 51

Short Answer

If selling price per unit and unit variable cost increase by 5% and fixed cost remain the same, which CVP relation is correct? $$\begin{array} { | c | l | l | l | } \hline & \begin{array} { c } \text { Contribution Margin } \\\text { Per Unit }\end{array} & \begin{array} { c } \text { Break-Even } \\\text { Units }\end{array} & { \begin{array} { c } \text { Overall } \\\text { Profit }\end{array} } \\\hline \text { A. } & \text { Decrease } & \text { Increase } & \text { Increase } \\\hline \text { B. } & \text { Decrease } & \text { Decrease } & \text { Decrease } \\\hline \text { C. } & \text { Increase } & \text { Increase } & \text { Increase } \\\hline \text { D. } & \text { Increase } & \text { Decrease } & \text { Increase } \\\hline \text { E. } & \text { Decrease } & \text { Increase } & \text { Decrease } \\\hline\end{array}$$

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Definitions:

Snapshot

A visual or data representation capturing the state or conditions of a system at a particular moment in time.

Asset Turnover Ratio

A financial ratio that measures the efficiency of a company's use of its assets to generate sales or revenue.

Industry Average

A benchmark or average measurement of performance or financial metrics within a particular industry sector.

Insolvency

A financial state in which an entity can no longer meet its debt obligations, leading to legal consequences such as bankruptcy.