If the break-even point is 200 units and the contribution margin is $20 per unit, then every unit sold above 200 will contribute $20 to profit.

Question

BlackTom AI · Accepted Answer

Before evaluating the statements, recall two key concepts: the break-even point is the level of sales at which total contribution margin covers fixed costs, resulting in zero profit, and the contribution margin per unit is the amount each unit contributes to covering fixed costs and then to profit.

Option a: True. If the break-even point is 200 units and the contribution margin is $20 per unit, then any unit sold beyond 200 will add exactly $20 to profit (assuming fixed costs are already covered at break-even). This is because once past break-even, there is no longer a need to allocate funds to fixed costs; each additional unit increases the total contribution toward profit by the per-unit margin.

Option b: False. The statement claims that units above 200 do not contribute to profit, which contradicts the fundamental property of contribution margin. Beyond break-even, every extra unit increases profit by the contribution margin, so the assertion that those units don’t contribute is incorrect.

In summary, the logic hinges on understanding that break-even marks zero profit, and each additional unit adds its contribution margin to profit. Since the CM is $20 per unit, every unit sold above 200 raises profit by $20, making the claim in option a accurate and the claim in option b inaccurate.

MCD2150 - T3 - 2025 Week 10 Workshop 1 Quiz

If the break-even point is 200 units and the contribution margin is $20 per unit, then every unit sold above 200 will contribute $20 to profit.

View Explanation

Log in for full answers

Similar Questions

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

The break-even point is that at which:

Your accountant advises you to find the break-even point of the day care center you operate. You can do this by

True or False? The break-even point is the point at which the level of sales is equal to a foodservice's combined variable and fixed costs.

Break-even is not affected with changes in ___________________

A company has a break-even point of RM100,000 and current sales of RM150,000. What is the company's margin of safety as a percentage?

Which of the following would decrease the break-even point in units?

More Practical Tools for International Students

Homework AI Solver

Stylized Writing Assistant

Plagiarism Checker Assistant

Citation Assistant

In-Class Translation Assistant

Class Notes Assistant

Quiz Search Assistant

Past Exam Questions by School

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler