Which of the following would produce the largest increase inthe contribution mar

Question

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


A 14% increase in variable cost.

A 7% increase in selling price.

A 23% increase in the number of units sold.

A 15% decrease in selling price.

A 17% decrease in fixed cost. Which of the following would produce the largest increase inthe contribution margin per unit? A 14% increase in variable cost. A 7% increase in selling price. A 23% increase in the number of units sold. A 15% decrease in selling price. A 17% decrease in fixed cost.

A 14% increase in variable cost.

A 7% increase in selling price.

A 23% increase in the number of units sold.

A 15% decrease in selling price.

A 17% decrease in fixed cost.

Explanation / Answer

The contribution margin per unit is simply the price per unit minusthe variable cost per unit. CM = P - VC changes in fixed cost and number of units sold have no effect onthis measure. This leaves A, B, and D. An increase in variable cost will decrease the contribution margin,so we can rule out A. This leaves B and D. A decrease in selling price will decrease the contribution margin,so we can rule out D. The answer therefore, is B. A 7% increase in sellingprice.

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