Suppose fixed costs increase. What will be the effect on the break-even point in units?
A) The break-even point will increase.
B) The break-even point will decrease.
C) The break-even point will remain the same.
D) The break-even point will remain the same; however, contribution per unit will decrease.

Question

Quizplus · Accepted Answer

Fixed costs are costs that do not vary with the production level. So, if fixed costs increase, the total cost will increase, and the break-even point will increase as well. This means the business will need to sell more units to cover its costs and reach the break-even point.

Suppose Fixed Costs Increase