TRUE - To estimate what the profit will be at various levels of activity, multiply the number of units to be sold above or below the break-even point by the unit contribution margin.
Contribution margin (CM), or dollar contribution in keeping with unit, is the promoting rate in step with unit minus the variable price according to unit. "Contribution" represents the portion of sales revenue that is not consumed by means of variable costs and so contributes to the insurance of fixed fees. This idea is one of the key building blocks of wreck-even analysis. Decomposing sales as Contribution plus Variable charges. within the price-extent-earnings evaluation model, costs are linear in extent.
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