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6. Please answer the following independent questions a. Explain what is the contribution margin and explain its significance! b. Explain how the contribution margin is
6. Please answer the following independent questions a. Explain what is the contribution margin and explain its significance! b. Explain how the contribution margin is affected by an increase in the sales price, from an increase in fixed costs and an increase in the variable cost per unit! (each one separately) What is operating leverage for a business? How would you interpret the fact that a business has a degree of operating leverage of "4"? Which type of cost may affect the degree of operating leverage? Explain! C. 7. Business ABC sells its product for $80 per unit. The variable cost per unit is $60 and the fixed cost is $3,000 per month. a. Calculate the break-even point of the business ABC in units and in sales and explain its significance for the management of ABC b. Calculate the margin of safety when the business sells 200 units and explain its significance for management The business expects to sell 200 units in September. Prepare an income statement for the month of September using on the contribution margin method. (simple format is ok)
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