Question

Assuming all other factors remain constant, if fixed costs increase, then the break-even point will:

Answer 1

Results are below.

Step-by-step explanation:

To calculate the break-even point, the following formula is required:

Break-even point in units= fixed costs/ contribution margin per unit

Contribution margin per unit= selling price - unitary variable cost

If the fixed costs increase and the unitary contribution margin remains constant, the company would have to sell a larger amount of units to cover the fixed costs.

For example:

Fixed costs0= 120,000

Fixed costs 1= 140,000

Unitary contribution margin= 40

Break-even point in units= 120,000/40= 3,000

Break-even point in units= 140,000/40= 3,500