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.

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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.

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