A company has fixed costs of $900 and a per-unit contribution margin of $3. Which of the following statements is true?
A. The firm will definitely lose money in this situation.
B. Once the break-even point is reached; the company will increase income at the rate of $3 per unit.
C. The situation described is not possible and there must be an error.
D. Each unit "contributes" $3 toward covering the fixed costs of $900.
E. Each unit "contributes" $3 toward covering the fixed costs of $900 and once the break-even point is reached, the company will increase income at the rate of $3 per unit.
Answer: E
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