If the Variable Cost of Goods Sold Totaled $90,000 for the Year

question 37

Multiple Choice

If the variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each) , the effect of the quantity factor on the change in contribution margin is:

• A) $10,800 decrease
• B) $10,800 increase
• C) $10,000 increase
• D) $10,000 decrease

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Definitions:

Marginal Cost

Refers to the additional expense associated with producing one more unit of a good or service, reiterated in a new explanation.

Marginal Revenue

Additional earnings derived from the sale of an extra unit of a product or service.

Marginal Cost

The additional expense incurred when one more unit of a product or service is created.

Average Total Cost

The total cost divided by the quantity of output produced, representing the per-unit cost of production.