Question

An increase in cost (fixed cost or variable cost) tends to increase the operating breakeven point, whereas an increase in the sales price per unit will decrease the operating breakeven point.

True or false ?

Answer 1

TRUE

Step-by-step explanation:

Let's see the BEP formula:

`(Fixed Cost)/(Sales - Variable Cost) = BEP`

Notice that Fixed cost are being divide by the contribution margin, which is sales - variable cost

Let's see each statment and check if there is true.

Remember all of them must be true

if fixed cost increase, then the ammount to cover is higher, so the BEP increase:

Imagine you are sharing candies to some kinds and suddently 10 more kind arrives, you are gonna need more candies to share to each children the same ammount.

TRUE

IF variable cost decrease:

the contribution margin decrease, because more portion of the sale is used to pay the variable cost, which makes the effort of paying the fixed cost higher.

like when you are saving for a certain ammount, let's say $100 per month to achieve $1,000 If an unexpected expense happens and you save $50 per month, you going to take more time.

TRUE

If Sales Increase, then the contribution margin increase, so it makes the effort to pay the fixed cost more easy, like if in the previous example instead of going down we went up to $200. The 1,000 goal would be more achievable.

TRUE

All statment are true so the sentence is TRUE