Which of the Following Would Produce the Largest Increase in the Contribution

question 54

Multiple Choice

Which of the following would produce the largest increase in the contribution margin per unit?

• A) A 7% increase in selling price.
• B) A 15% decrease in selling price.
• C) A 14% increase in variable cost.
• D) A 17% decrease in fixed cost.
• E) A 23% increase in the number of units sold.

---

Definitions:

Ratios

Financial metrics used to make comparisons between different aspects of a company's performance or financial position, to assess its health, efficiency, and profitability.

Basic Earning Power Ratio

A financial metric that indicates how well a company's assets are generating income before the effects of taxes and financing costs.

Financial Leverage

The extent to which fixed-income securities (debt and preferred stock) are used in a firm’s capital structure. If a high percentage of a firm’s capital structure is in the form of debt and preferred stock, then the firm is said to have a high degree of financial leverage.

Tax Effects

The impact of taxation on an individual's or company's financial decisions or situations, especially regarding how investments and financial strategies are structured.