A Level Accounting (9706)•9706/13/M/J/19
Explanation
Change in profit equals decrease in total contribution Steps:
- Original contribution per unit = 6 per unit
- New sales volume = 1000 × (1 - 20%) = 800 units
- New contribution per unit = 5.4 per unit
- New total contribution = 800 × 4320
- Profit fall = original contribution - new contribution = 4320 = $1680 (fixed costs unchanged, so no impact on change)
Why B is correct:
- Profit change formula is Δprofit = Δcontribution - Δfixed costs; here Δfixed costs = 1680 (fall of $1680)
Why the others are wrong:
- A: $6000 is last month's total contribution, ignores changes
- C: $2800 lacks calculation basis; possibly erroneous addition of percentages
- D: $4320 is this month's total contribution, not the profit change
Final answer: B
Topic: Costs and cost behaviour
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