Question

If fixed costs decrease, but variable cost and price remain the same, the break-even point:_______.

a. decreases.
b. increases.
c. remains the same.
d. may increase or decrease depending on sales.

Answer 1

a. decreases.

Step-by-step explanation:

The formula to compute the break-even point in units is shown below:

= (Fixed expenses ) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

Since the variable cost and price remain the same but the fixed cost decreases that show a direct relationship with the break-even. Therefore, decreases in fixed cost would result in decreases in break-even