Question

If the contribution margin is not sufficient to cover fixed expenses:Multiple Choicevariable expenses equal contribution margin.contribution margin is negative.a loss occurs.total profit equals total expenses.

Answer 1

Answer:

The correct answer is C. Loss occurs.

Explanation:

If the contribution margin is not sufficient to cover fixed expenses:

The contribution margin is calculated by deducting from sales the variable components. Unless the selling price is lower than unitary variable costs, contribution margin will never be negative.

When the contribution margin is lower than fixed costs, the company incurs on a loss.