Answer:
D) CM per unit: Increases
CM ratio: No change
BE in units: Decreases
Explanation:
Let us suppose that
In the first case
The selling price per unit is $100
And, the variable cost per unit is $50
The fixed expense is $100,000
So, the contribution margin per unit
= $100 - $50
= $50
The CM ratio is
= $50 ÷ $100
= 50%
And, the break even point in units is
= $100,000 ÷ $50
= 2,000 units
Now if the selling price per unit and the variable expense per unit both increase by 10%
So,
The selling price per unit is $100 × 1.10 = $110
And, the variable cost per unit is $50 × 1.10 = $55
The fixed expense is $100,000
So, the contribution margin per unit
= $110 - $55
= $55
The CM ratio is
= $55 ÷ $110
= 50%
And, the break even point in units is
= $100,000 ÷ $55
= 1,818 units
Hence, the last option is correct
