Question

If fixed costs increased and variable costs per unit decreased, the break-even point would a. decrease b. increase c. remain the same d. cannot be determined from the data provided

Answer 1

--Correct Answer = Option 'd': cannot be determined from the data provided

--This is because not much information is provided as to 'how much' fixed cost has increased or variable cost per unit has decreased.

--The Break even point can be increased or decreased or can remain constant DEPENDING UPON the intensity of increase or decrease in Fixed cost and variable cost.

--If increase in fixed cost is such that it can be covered by increase in contribution margin per unit (due to decrease in variable cost), the break even point will decrease, otherwise it will increase.