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

Question

Quizplus · Accepted Answer

Operating breakeven point is the point at which a firm's total revenues cover its total operating costs. To reduce its operating breakeven point, the firm needs to increase its contribution margin, which can be achieved by increasing the selling price of the product, reducing the variable cost per unit, or increasing the sales volume. Option C is the best choice as it directly increases the contribution margin without increasing fixed costs or reducing selling price. Increasing fixed costs (option A) will increase the operating breakeven point, decreasing selling price (option B) will reduce the contribution margin, and increasing variable cost per unit (option D) will reduce the contribution margin. Option E is not relevant to reducing the operating breakeven point.

Everything Else Equal, a Firm Can Reduce Its Operating Breakeven