Bloom Company has variable cost per unit of $20 and a sales price of $35 per unit.Its total fixed costs are $240,000.Which of the following is a correct statement?
A) Company D's break-even point is 12,000 units.
B) If budgeted sales are 25,000 units, D's margin of safety is 10,000 units.
C) If Company D's variable cost per unit increases and nothing else changes, the margin of safety will decrease.
D) If Company D's variable cost per unit decreases and nothing else changes, the break-even point will stay the same.

Question

Quizplus · Accepted Answer

C) When variable costs per unit increase, the contribution margin per unit decreases, which means the company must sell more units to cover its fixed costs and reach the break-even point. This reduces the margin of safety, which is the difference between actual or budgeted sales and the break-even sales volume.

Bloom Company Has Variable Cost Per Unit of $20 and a Sales