A firm has $50,000 in fixed costs, a selling price of $25 per unit, and variable costs of $5 a unit. If the fixed costs increase to $60,000:
A) Breakeven volume will increase.
B) Breakeven volume will decrease.
C) Profits will be increased.
D) Selling price will be decreased.

Question

Quizplus · Accepted Answer

Breakeven volume increases when fixed costs increase, assuming the selling price per unit and variable costs per unit remain constant. This is because the firm needs to sell more units to cover the higher fixed costs.

A Firm Has $50,000 in Fixed Costs, a Selling Price