A company increased the selling price for its product from $1.00 to $1.20 a unit when total fixed costs increased from $400,000 to $450,000 and variable cost per unit remained unchanged.How would these changes affect the break-even point?
A)The break-even point in units would be increased.
B)The break-even point in units would be decreased.
C)The break-even point in units would remain unchanged.
D)The effect cannot be determined from the information given.

Question

Quizplus · Accepted Answer

The break-even point in units would decrease because the increase in selling price increases the contribution margin per unit, which offsets the increase in fixed costs.

A Company Increased the Selling Price for Its Product from $1.00