alleryStart learning →Raising the selling price while holding variable cost constant changes the contribution margin so it:
AStays the same
BBecomes zero
CIt rises up
DIt falls off
Answer & Solution
Correct answer: C. It rises up
1. Contribution margin depends on both price and variable cost.
2. Contribution margin is the amount by which selling price exceeds total variable cost per unit.
3. It is computed as a difference between those two figures.
4. Raising the first figure while holding the second constant widens the gap.
5. So the contribution margin rises.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 3 'Cost-Volume-Profit Analysis'_
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