Judge each margin claim

Exercise and reference answers

Questions

1. Statement is true

   Yes

   Statement

   Selling more units at the same price and cost leaves the contribution margin ratio unchanged.

2. Statement is true

   Yes

   Statement

   Raising the selling price per unit while costs hold steady raises the contribution margin ratio.

3. Statement is true

   No

   Statement

   Raising the variable cost per unit raises the contribution margin ratio.

4. Statement is true

   No

   Statement

   A change in fixed costs shifts the contribution margin ratio.

5. Statement is true

   Yes

   Statement

   At breakeven the contribution margin exactly equals total fixed costs.

6. Statement is true

   Yes

   Statement

   Every unit sold above breakeven adds profit equal to its unit contribution margin.

7. Statement is true

   No

   Statement

   A lower breakeven point is worse, because fewer units get covered.

Instructions

Tap true or false for each statement.

Explanation