Higher raw material costs raise variable costs per unit

Steps:

• Raw material shortage increases purchase prices, raising variable costs per unit produced.
• Marginal cost, the additional cost of one more unit, increases due to higher variable costs.
• Contribution margin (sales price minus variable cost per unit) decreases as variable costs rise.
• Break-even point (fixed costs divided by contribution margin per unit) increases because the margin shrinks.

Why D is correct:

• D matches the formulas: marginal cost rises with variable costs; contribution falls (price - variable cost); break-even rises (fixed costs / lower contribution).

Why the others are wrong:

• A: Wrong on all—break-even and marginal cost increase, not decrease.
• B: Wrong on break-even (increases) and marginal cost (increases); contribution decreases.
• C: Wrong on marginal cost (increases, not decreases) and contribution (decreases, not increases).

Final answer: D