The average price Washburn charges for a guitar is $349.This price must cover its average costs of $25 for direct materials and $120 in direct labour.It must also cover fixed expenses of $38,000.Assuming everything else stays the same,the company's planned move to Nashville,Tennessee,will reduce its fixed costs by $4,800.This would cause the slope of the total cost curve to __________ and the break-even quantity to __________.
A)decrease; stay the same
B)decrease; increase
C)stay the same; decrease
D)stay the same; increase

Question

Quizplus · Accepted Answer

The slope of the total cost curve is determined by variable costs, which remain unchanged, so the slope stays the same. The reduction in fixed costs decreases the break-even quantity.

The Average Price Washburn Charges for a Guitar Is $349