If fixed costs decrease, but variable cost and price remain the same, the break-even point
A) decreases.
B) increases.
C) remains the same.
D) may increase or decrease depending on sales.

Question

Quizplus · Accepted Answer

The break-even point is the level of sales at which a company does not make a profit or a loss. The break-even point is calculated by dividing the total fixed costs by the contribution margin (the difference between price and variable cost per unit). If fixed costs decrease, the break-even point decreases because the total amount that needs to be covered by sales decreases. Therefore, the correct answer is A.

If Fixed Costs Decrease, but Variable Cost and Price Remain