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Qstn.
For a product that has a positive unit contribution, which of the following events would tend to increase total contribution by the greatest amount ?
A) 10% decrease in variable cost
B) 10% increase in selling price
c) 10% increase in volume sold
d) 10% decrease in total fixed costs.The text choose ( b) as an answer
Please what is your answer on this ?
example if we have cost card having a selling price per unit of $100
variable cost per unit $60contribution will be $40
if we make sales of 1000 units , that will give us total contribution $40,000
so the
On your example a 10% decrease in variable cost will give a new total contribution of $46,000
A 10% increase in selling price will give a new total contribution of $50,000
A 10% increase in the volume sold will give a new total contribution of $44,000.
(A change in the fixed costs is obviously irrelevant)
So the correct answer is indeed (b) 🙂
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