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A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of...

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Accounting

A company has fixed costs of $900 and a per-unit contributionmargin of $3. Which of the following statements is true? ______

A) Once the break-even point is reached; the company willincrease income at the rate of $3 per unit.

B) Each unit "contributes" $3 toward covering the fixed costs of$900.

C) Each unit "contributes" $3 toward covering the fixed costs of$900 and once the break-even point is reached, the company willincrease income at the rate of $3 per unit.

D) The firm will definitely lose money in this situation.

E) The situation described is not possible and there must be anerror.

Answer & Explanation Solved by verified expert
4.0 Ratings (515 Votes)
The correct answer is Option C Each unit contributes 3 toward covering the fixed costs of 900 and once the breakeven point is reached the company will increase income at the rate of 3 per unit This is because the Net Income is negative until the sales reaches break even level Once the Break    See Answer
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