The breakeven sales volume of the Encore Co. is 800,000 units. If the variable cost per unit increases by $1.50 and the selling price per unit increases by $2 next year, then the new breakeven point will be:
A) The same
B) Higher
C) Lower
D) Cannot be determined

Question

Quizplus · Accepted Answer

The breakeven point will be lower because the increase in selling price per unit is greater than the increase in variable cost per unit, improving the contribution margin per unit and thus requiring fewer units to cover fixed costs.

The Breakeven Sales Volume of the Encore Co