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An increase in variable costs per unit, where selling price and fixed costs remain constant, will result in which of the following:
Suggested Answer: B
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12 comments · newest first
LI
Lindsey
3 days ago
No way, it's A. Break-even units fall? Doesn't add up.
SK
Skye
8 days ago
I agree, B makes sense. Costs go up, profits drop.
AN
Antonio
13 days ago
I think it's B. Decrease in profit/volume ratio.
TI
Tijuana
18 days ago
Surprised that contribution per unit doesn't increase!
AN
Annelle
23 days ago
Yeah, B makes the most sense here.
CA
Carmen
29 days ago
Wait, how does this not impact the margin of safety?
LE
Leatha
1 month ago
I disagree, it could affect the break-even point too.
RA
Raymon
1 month ago
Definitely B, profit/volume ratio will drop.
KA
Kattie
1 month ago
I recall that an increase in variable costs means less contribution per unit, so option D seems wrong to me. I think B is the right choice.
LA
Lashonda
2 months ago
I'm a bit confused about the margin of safety. If costs go up, wouldn't that decrease the margin instead of increasing it?
GI
Giovanna
2 months ago
I remember practicing a similar question where we discussed how variable costs impact contribution margins. I feel like option B makes sense here.
LE
Lenita
2 months ago
I think an increase in variable costs would definitely affect the profit/volume ratio, but I'm not entirely sure how it connects to the break-even point.