Everything else equal, a firm can reduce its operating breakeven point by:
A) increasing its fixed costs.
B) decreasing the selling price of the product that is sold.
C) increasing the contribution margin.
D) increasing the variable cost per unit.
E) decreasing the earnings per share.

Question

Quizplus · Accepted Answer

The operating breakeven point is the level of sales at which a firm's total revenue equals its total expenses. The contribution margin is the amount by which each unit sold contributes to covering the fixed costs and ultimately earning a profit. Therefore, increasing the contribution margin would allow the firm to cover more fixed costs with each unit sold, reducing the operating breakeven point.

Everything Else Equal, a Firm Can Reduce Its Operating Breakeven