Which of the following statements is not correct?
A) The breakeven point increases and the margin of safety decreases when the contribution margin ratio decreases.
B) The breakeven point decreases and the margin of safety increases when fixed costs decrease.
C) The breakeven point increases and the margin of safety decreases when fixed costs increase.
D) The breakeven point decreases and the margin of safety increases when the variable cost per unit increases.

Question

Quizplus · Accepted Answer

The breakeven point is calculated as fixed costs divided by the contribution margin per unit (or ratio). An increase in variable cost per unit would decrease the contribution margin, leading to an increase in the breakeven point, not a decrease. Therefore, statement D is not correct as it suggests the opposite.

Which of the Following Statements Is Not Correct