The break-even point in dollars will increase, other things being the same, if: A.Unit selling price...

The break-even point in dollars will increase, other things being the same, if:

A.Unit selling price increases.

B.Unit variable costs decrease.

C.Total fixed costs increase.

D. All of the above are correct.

E.None of the above are correct.

Solutions

Expert Solution

Answer: C. Total fixed costs increase.

The break-even point in dollars is computed by dividing the total fixed cost by the contribution margin ratio.

If the unit selling price increases, other things being the same, the contribution margin ratio will increase and thereby the break-even point will decrease. Hence, option A is incorrect.

If the unit variable costs decrease, other things being the same, the contribution margin ratio will increase and thereby the break-even point will decrease. Hence, option B is incorrect.

If the total fixed costs increase, other things being the same, there will be no change in the contribution margin ratio. With increased fixed costs (numerator) and same contribution margin ratio (denominator) the break-even point in dollars will increase as more units will be required to be sold in order to cover the increased fixed costs. Thus, option C. is the correct answer.

Options D. and E. are also thus incorrect.

ekkarill92 answered 11 months ago

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