(CPA adapted, November 1992)The strategy most likely to reduce the breakeven point would be to:

Question

Quizplus · Accepted Answer

Decreasing the fixed costs and increasing the contribution margin will result in a lower breakeven point. This is because fixed costs are the costs that do not change with the level of production or sales, whereas the contribution margin is the difference between sales revenue and variable costs. By reducing fixed costs, there is less pressure to generate sales revenue to cover those costs. At the same time, by increasing the contribution margin, each unit sold contributes more towards covering the remaining fixed costs and generating a profit. Therefore, decreasing fixed costs and increasing the contribution margin is the most effective strategy to reduce the breakeven point.

(CPA Adapted, November 1992)The Strategy Most Likely to Reduce the Breakeven