The breakeven point decreases if:
A)the variable cost per unit increases
B)total fixed costs decrease
C)the contribution margin per unit decreases
D)the selling price per unit decreases

Question

Quizplus · Accepted Answer

The breakeven point is the level of sales at which total costs equal total revenues. Total costs include both variable and fixed costs. If total fixed costs decrease, the breakeven point will also decrease. This is because fixed costs represent a larger portion of the total costs, thus there is a lower sales volume required to cover the remaining variable costs and generate profit. The other choices would increase the breakeven point.

The Breakeven Point Decreases If