ACCT 2301 CH 4 Contribution Margin Concepts

Which is the equation for operating income

(Price × Units sold) − (Unit variable cost × Units sold) − Fixed cost

Total revenues less total fixed costs equal the contribution margin.

False

The impact on a firm's income resulting from a change in the number of units sold can be assessed by multiplying the unit contribution margin by the change in units sold assuming that fixed costs remain the same.

True

The contribution income statement highlights:

Variable and fixed costs

The contribution margin is

the difference between sales and variable costs.

To determine contribution margin use:

Correct both variable manufacturing costs and variable non-manufacturing costs

Most firms would like to earn operating income equal to the break-even point.

False

Contribution margin equals

Revenues minus revenue costs

If variable expenses decrease and the price increases, the break-even point decreases.

True

The contribution margin income statement provides a good check to determine if the sale of a certain number of units really results in operating income of the given amount.

True