There Is an Important Relation Between Contribution Margin and Profit

question 16

Multiple Choice

There is an important relation between contribution margin and profit.Which of the following statements is not true?

• A)As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.
• B)As the number of units sold rises, profit increases by the additional contribution margin per unit.
• C)As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.
• D)As the number of units sold falls, profit increases by the additional contribution margin per unit.

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Definitions:

MRP

Material Requirements Planning; a system for managing manufacturing processes through inventory control, scheduling, and procurement.

JIT

Just In Time, a production strategy that aims to reduce in-process inventory and associated carrying costs by producing and delivering products just in time to be sold or used.

Gross Requirements Plan

A schedule that specifies the amount and timing of future material and component requirements necessary to fulfill the production plan.

Net Requirements Plan

An output of the manufacturing planning process that identifies the quantity and timing of future material or product demands based on current inventory levels and scheduled supply.