A Company Has Fixed Costs of $900 and a Per-Unit

question 11

Multiple Choice

A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of the following statements is true?

• A) Each unit "contributes" $3 toward covering the fixed costs of $900.
• B) The situation described is not possible and there must be an error.
• C) Once the break-even point is reached; the company will increase income at the rate of $3 per unit.
• D) The firm will definitely lose money in this situation.
• E) Each unit "contributes" $3 toward covering the fixed costs of $900 and once the break-even point is reached, the company will increase income at the rate of $3 per unit.

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Definitions:

Decreasing Rate

Describes a situation where the rate at which something happens or is done reduces over time.

Increasing Rate

A situation where the magnitude or quantity of something grows at a pace that accelerates over a given period of time.

Slope

In mathematics and economics, the measure of the steepness or incline of a line, often representing the rate of change.

Y-axis

The Y-axis is the vertical line in a graph or chart, which, in coordinate geometry, usually represents the range of values for a dependent variable.