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Ogallah Inc. sells its product for $9.25 per unit. The variable costs per units are $2.50 and total fixed costs are $452,250. If Ogallah buys new software for the production process at a cost of $55,250, variable costs will be reduced by 20%.
-If Ogallah raised the selling price of its product,what effect would that have on the breakeven point prior to and after the purchase of the computer,respectively?
A)decrease/decrease
B)increase/increase
C)decrease/increase
D)increase/decrease

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Quizplus · Accepted Answer

Raising the selling price increases the contribution margin per unit, which decreases the breakeven point both before and after the purchase of the software.

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