Question

If the price increases, but the fixed and variable costs don't change, the break-even point: A...

If the price increases, but the fixed and variable costs don't change, the break-even point:

A

increases
B

decreases
C

remains the same
D

may increases or decreases, depending on sales
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Homework Answers

Answer #1

Answer: B) Decreases

Explanation:

We Know that Breakeven point=Fixed Costs/Contribution, Where Contribution = Sales-Variable Cost.

Since price has increased without any change in fixed or variable costs, the value of denominator in the formula will rise leading to decline in the value of breakeven point.

In other words, if the price has increased without affecting the fixed and variables costs we will achive breakeven point early because we will reach the point of no-profit or loss early as we will be recovering the costs more easily as compared to lower sales prices.

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