which of the following occurs if a company decreases its selling price per unit? a. net income increase b. more than one of the answers would occur c. contribution margin ration increase d. break even point increase e. contribution magrin increase

which of the following occurs if a company decreases its selling price per unit? a. net income increase b. more than one of the answers would occur c. contribution margin ration increase d. break even point increase e. contribution magrin increase

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

which of the following occurs if a company decreases its selling price per unit?

a. net income increase

b. more than one of the answers would occur

c. contribution margin ration increase

d. break even point increase

e. contribution magrin increase

Expert Solution

Step 1 Introduction

The contribution margin is calculated as difference between sales and variable costs. The contribution increases with increase in SP and decrease in VC. The contribution margin decreases with decrease in SP and increase in VC. SP stands for Selling Price and VC stands for Variable Cost.

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