By performing a cost-volume-profit analysis, EZ Rentals discovered that its operating breakeven point, QOpBEP, is at sales equal to $180,000. If EZ wants to decrease its operating breakeven point, which of the following actions should be taken? Assume everything else is equal.
A)Increase fixed operating costs.
B)Decrease sales.
C)Increase the variable operating cost ratio.
D)Decrease fixed financial costs.
E)Increase the product's contribution margin.

Question

By performing a cost-volume-profit analysis, EZ Rentals discovered that its operating breakeven point, QOpBEP, is at sales equal to $180,000. If EZ wants to decrease its operating breakeven point, which of the following actions should be taken? Assume everything else is equal. 
A)Increase fixed operating costs.
B)Decrease sales.
C)Increase the variable operating cost ratio.
D)Decrease fixed financial costs.
E)Increase the product's contribution margin.

Quizplus · Accepted Answer

To decrease the operating breakeven point, EZ Rentals needs to increase its contribution margin. This can be accomplished by increasing the price of the product, decreasing variable costs, or increasing sales. Since decreasing sales is not a desirable option, and increasing fixed operating costs or the variable operating cost ratio would increase the breakeven point, the best option is to increase the product's contribution margin, which can be achieved by increasing the selling price or reducing variable costs.

By Performing a Cost-Volume-Profit Analysis, EZ Rentals Discovered That Its