If variable costs increase by 5% without a corresponding increase in selling price,the number of units needed to breakeven will ________.
A) decrease
B) remain the same
C) increase
D) cannot be determined

Question

Quizplus · Accepted Answer

If variable costs increase by 5%, the contribution margin per unit (selling price - variable cost) will decrease. As the contribution margin per unit decreases, the number of units needed to break even will increase. Therefore, the correct answer is choice C) increase.

If Variable Costs Increase by 5% Without a Corresponding Increase