If the variable cost per unit decreases while the sales price per unit and total fixed costs remain constant, which of the following statements is true?

Question

Quizplus · Accepted Answer

If the variable cost per unit decreases while the sales price per unit and total fixed costs remain constant, the contribution margin per unit increases. This means that each unit sold will generate more profit, which will lead to an increase in the overall contribution margin. As the breakeven point is the point where the total contribution margin equals total fixed costs, a higher contribution margin per unit will result in a lower breakeven point, therefore decreasing the breakeven point.

If the Variable Cost Per Unit Decreases While the Sales