There Is an Important Relation Between Contribution Margin and Profit

question 153

Short Answer

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)All of these ans choices are correct.

• 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)All of these ans choices are correct.

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Definitions:

Rent

The price paid for the use of property or land, typically on a periodic basis by tenants to landlords.

Average Total Cost Curve

A graphical representation that shows the average total cost of producing different quantities of a good.

Diminishing Returns

A principle stating that if one factor of production is increased while other factors are held constant, the output per unit of the variable factor will eventually decrease.

Output Levels

Quantities of products or services produced within a given timeframe, reflecting the scale of a company's or industry's production.