Asked by Adrieanna Davis-Coco on May 19, 2024
Verified
Suppose the selling price per unit increased from $5.00 to $6.00 per ticket. What effect would this have on the cost volume profit analysis?
A) The contribution margin would increase.
B) The contribution margin would decrease.
C) The break-even point in units would decrease.
D) The contribution margin would increase AND the break-even point in units would decrease.
Cost Volume Profit Analysis
An accounting technique used to determine how changes in costs and volume affect a company's operating income and net income.
Selling Price Per Unit
The amount of money charged to the customer for one unit of a product or service.
- Evaluate the effects of changes in selling prices, variable outlays, and fixed charges on the contribution margin and break-even thresholds.
- Understand the effect of changes in sales volume on cost volume profit (CVP) analysis, including changes in sales mix.
Verified Answer
KR
katrina rojasMay 21, 2024
Final Answer :
D
Explanation :
The contribution margin would increase because it is calculated as the selling price per unit minus the variable cost per unit. With a higher selling price, the difference between the selling price and the variable cost (assuming it remains constant) would be greater, thus increasing the contribution margin. Additionally, with a higher contribution margin, fewer units would need to be sold to cover fixed costs, leading to a decrease in the break-even point in units.
Learning Objectives
- Evaluate the effects of changes in selling prices, variable outlays, and fixed charges on the contribution margin and break-even thresholds.
- Understand the effect of changes in sales volume on cost volume profit (CVP) analysis, including changes in sales mix.