Which of the following statements is TRUE if total fixed costs decrease while the sales price per unit and variable cost per unit remain constant?
A) The contribution margin increases.
B) The breakeven point increases.
C) The contribution margin decreases.
D) The breakeven point decreases.

Question

Quizplus · Accepted Answer

If total fixed costs decrease, the breakeven point (the level of sales at which total revenues equal total costs) will decrease. This means that the company will need to sell fewer units to cover its total costs and start making a profit. The contribution margin (the amount of revenue that covers fixed costs and contributes to profit) will remain the same since the sales price per unit and variable cost per unit are constant.

Which of the Following Statements Is TRUE If Total Fixed