ECONOMICS

Detailed explanation-1: -If you reduce the variable costs of the product, you increase the product’s contribution margin.

Detailed explanation-2: -Variable Cost per unit decreases: The total cost line will decrease, as total Cost includes fixed Costs and variable Costs. As production increases, fixed cost per unit decreases, leading to a lower total cost relative to total production.

Detailed explanation-3: -If the fixed costs for a firm increase, the contribution margin remains unaffected because the contribution margin is ascertained by deducting the total variable cost from the sales revenue.

Detailed explanation-4: -Because of the way contribution margin is calculated, an increase in fixed costs doesn’t directly change the margin, but it may well touch off a process that ultimately affects the margin.