A firm's break-even point will rise if
A)fixed costs decrease.
B)contribution margin increases.
C)price per unit rises.
D)variable cost per unit rises.

Question

Quizplus · Accepted Answer

The break-even point is the level of sales at which total revenues equal total costs. It is calculated by dividing total fixed costs by the contribution margin per unit. The contribution margin is the difference between the selling price per unit and the variable cost per unit. If the variable cost per unit rises, the contribution margin decreases, and therefore, the break-even point rises. This means the firm would need to sell more units to cover its fixed costs and break even.

A Firm's Break-Even Point Will Rise If