Company X produces and sells a single product and delivers a positive contribution margin.
If the selling price and the variable cost per unit both increase 5% and fixed costs do not change, what is the effect on the contribution margin per unit ($/unit) and the contribution margin as a percentage (%) of sales?

Question

Company X produces and sells a single product and delivers a positive contribution margin. 
 If the selling price and the variable cost per unit both increase 5% and fixed costs do not change, what is the effect on the contribution margin per unit ($/unit) and the contribution margin as a percentage (%) of sales?

Accepted Answer

Contribution margin $/unit: increases; contribution margin %: unchanged

Answer

Contribution margin $/unit: increases; contribution margin %: increases

Answer

None of the other options is correct

Answer

Contribution margin $/unit: increases; contribution margin %: decreases

Answer

Contribution margin $/unit: unchanged; contribution margin %: unchanged

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