Cost-Volume-Profit (CVP) analysis hinges on the concept of the contribution margin, which is the selling price per unit minus the variable cost per unit. The break-even point is achieved when the total contribution margin equals total fixed costs, resulting in zero operating income. For every unit sold beyond the break-even point, the fixed costs have already been fully covered. Consequently, the entire contribution margin from each additional unit sold contributes directly to and increases operating income by that exact amount.

A. Fixed costs per unit for each additional unit sold: This is incorrect because total fixed costs remain constant within the relevant range; the per-unit amount simply decreases as volume increases but does not add to income.

B. Variable costs per unit for each additional unit sold: This is a cost, not a source of income. The variable cost for each unit reduces the revenue that can contribute to profit.

D. Gross margin per unit for each additional unit sold: Gross margin is a concept from absorption costing and may include allocated fixed costs. Contribution margin is the precise term in CVP analysis that represents the addition to operating income.

1. Horngren

C. T.

Datar

S. M.

& Rajan

M. V. (2015). Cost Accounting: A Managerial Emphasis (15th ed.). Pearson Education. In Chapter 3

"Cost-Volume-Profit Analysis

" the text explains

"Once the breakeven point is reached

operating income will increase by the unit contribution margin for each additional unit sold." (p. 76).

2. Garrison

R. H.

Noreen

E. W.

& Brewer

P. C. (2018). Managerial Accounting (16th ed.). McGraw-Hill Education. Chapter 5

"Cost-Volume-Profit Relationships

" states: "After the break-even point has been reached

net operating income will increase by the amount of the unit contribution margin for each additional unit sold." (p. 190).

3. MIT OpenCourseWare. (2005). 15.501 Corporate Financial Accounting

Fall 2005. Lecture Notes

Lecture 19: Cost-Volume-Profit Analysis. Massachusetts Institute of Technology. The lecture notes explicitly demonstrate that after the break-even point

each additional unit sold increases pre-tax profit by the unit contribution margin. (Section: "Break-Even Analysis").