When other factors remain constant, a decrease in fixed costs:

Question

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A decrease in fixed costs means that a company has lower expenses that do not change with the number of units produced. This means that the contribution margin (price minus variable costs) for each unit is higher, which in turn leads to a lower break-even point and a lower number of units needed to earn profits. Therefore, a decrease in fixed costs decreases the number of units needed to earn profits.

When Other Factors Remain Constant, a Decrease in Fixed Costs