Question

Assuming no other changes in the cost-volume-profit relationship, which of the following will decrease the breakeven point in units?

1) Increase in fixed costs
2) Decrease in variable costs per unit
3) Increase in selling price per unit
4) Increase in contribution margin ratio

Answer 1

Options that decrease the breakeven point in units include a decrease in variable costs per unit, an increase in selling price per unit, and an increase in contribution margin ratio. An increase in fixed costs would actually increase the breakeven point.

Step-by-step explanation:

The student is asking about changes that would decrease the breakeven point in units, given a constant cost-volume-profit relationship. Out of the options provided:

• An increase in fixed costs would increase the breakeven point, not decrease it.
• A decrease in variable costs per unit would lead to a higher contribution margin per unit, thereby decreasing the breakeven point.
• An increase in selling price per unit also increases the contribution margin per unit and decreases the breakeven point.
• An increase in contribution margin ratio indicates that a larger portion of each unit sold contributes to covering fixed costs, which would also decrease the breakeven point.

Therefore, the options that would decrease the breakeven point in units are a decrease in variable costs per unit, an increase in selling price per unit, and an increase in the contribution margin ratio.