If a company is currently operating at its break-even point, which of the following statements is true? (Income tax considerations are ignored.)

Question

Quizplus · Accepted Answer

At the break-even point, a company is not making a profit or a loss. Therefore, any increase in sales (assuming costs remain constant) directly contributes to net profit. The contribution margin per unit is the amount by which the sale of one additional unit contributes to profit, after variable costs for that unit are covered. Thus, net profit increases by the increase in the number of units sold times the contribution margin per unit.

If a Company Is Currently Operating at Its Break-Even Point