33. A company's sales have increased after one of its products became popular through social media. The company would like to make more money per unit. What allows a company to increase its contribution margin per unit?
Answer: C
Using cheaper materials allows a company to increase its contribution margin per unit.
By opting for less expensive materials, a company can reduce its production costs, thereby increasing the contribution margin for each unit sold.
A) Increasing quality of material
While increasing the quality of materials may enhance the product's value and potentially boost sales, it typically raises production costs. This would not increase the contribution margin per unit, as the cost of goods sold would likely exceed the benefit of higher pricing.
B) Increasing salary of plant manager
Raising the salary of the plant manager would increase fixed costs without directly impacting the cost per unit of production. This would not contribute to a higher contribution margin, as it does not reduce the variable costs associated with each unit sold.
C) Using cheaper materials
Using cheaper materials directly reduces the cost of goods sold, thus increasing the contribution margin per unit. By lowering production costs, the company can retain a larger portion of the sales revenue for each unit sold, maximizing profitability.
D) Decreasing accounting salaries
While reducing accounting salaries may lower overall operating expenses, it does not affect the contribution margin directly tied to production costs. This option does not influence the cost associated with manufacturing each unit and therefore is not a viable method for increasing contribution margin per unit.
Conclusion
Using cheaper materials is the most effective strategy for increasing the contribution margin per unit, as it directly lowers production costs. Other options either increase costs or do not influence the cost per unit, making them ineffective for achieving the desired outcome of higher profitability per unit sold.