Answer
An increase of $0.04 per unit in variable costs would reduce the contribution margin and the company will incur a loss of USD 100,000 computed as follows;
Work Step by Step
(W-1) : Sales : 5,000,000 units × USD 0.5 per unit = USD 2,500,000
(W-2) : Variable Costs: 5,000,000 units × [USD 0.3 + 0.04] per unit = USD 1,700,000
