All else constant,the accounting break-even level of sales will decrease when the:
A)fixed costs increase.
B)depreciation expense decreases.
C)contribution margin decreases.
D)variable costs per unit increase.
E)selling price per unit decreases.

Question

Quizplus · Accepted Answer

Depreciation expense is a non-cash expense that reduces taxable income. When depreciation expense decreases, it increases the taxable income, leading to a higher after-tax cash flow. Since the accounting break-even point is the level of sales at which net income equals zero, a decrease in depreciation expense (and thus an increase in after-tax cash flow) means the company needs fewer sales to cover its fixed costs and break even, assuming all else remains constant.

All Else Constant,the Accounting Break-Even Level of Sales Will Decrease