An increase in selling price .a.increases the break-even point.b.does not affect the break-even point.c.optimize the break even point.d.decreases the break-even point.
Question
An increase in selling price .a.increases the break-even point.b.does not affect the break-even point.c.optimize the break even point.d.decreases the break-even point.
Solution
The answer is d. An increase in selling price decreases the break-even point.
Here's why:
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The break-even point is the point at which total revenue equals total costs. In other words, it's the point at which a business neither makes a profit nor incurs a loss.
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The formula for the break-even point in units is Total Fixed Costs / Selling Price per unit - Variable Cost per unit.
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If the selling price per unit increases, the denominator of the formula becomes larger (assuming the variable cost per unit remains constant).
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As a result, the total number of units needed to break even (the break-even point) decreases.
Therefore, an increase in selling price decreases the break-even point.
Similar Questions
If fixed costs increase, but variable cost and price remain the same, the break-even point: *decreases.increases.remains the same.may increase or decrease, depending on sales.
When the sales price increases and the costs function remains unchanged:Group of answer choicesBreak-even output decreases.Break-even output remains the same.Break-even output increases.Total fixed costs decrease.
What does the break-even point represent?a.The target market shareb.The minimum sales volume needed to cover costsc.The total market potentiald.The point of maximum profit
If calculations show that the break-even point is too high for the period, which of these is not a possible course of action? A. Consider changing the sales mix. B. Confirm that the cost forecasts used are reliable. C. Consider reducing prices. D. Consider the impact of increasing advertising costs to generate more sales.
If the sales output of a firm increases, the break-even point will:Group of answer choicesincrease.stay the same.reduce.equal the margin of safety.
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