Question

LO 3.3When sales price increases and all other variables are held constant, the break-even point will ________.

remain unchanged
increase
decrease
produce a lower contribution margin

Answer 1

decrease

Step-by-step explanation:

The break-even point is where costs or expenditures are equal to profit, especially in cost accounting in the economy and in businesses. There is no gain or loss at this point. Break-even analysis is a profitability analysis and helps businesses make strategic decisions, taking into account both fixed and variable expenses. The analysis achieves the point at which profits can be made if firms continue to produce by establishing a relationship between sales, expenses and profit.

Let's see all the conditions:

When sales price increases: Break-Even Point Decreases

When sales price decreases: Break-Even Point Increases

When variable costs increase: Break-Even Point Increases

When variable costs decrease: Break-Even Point Decreases

When fixed costs increase: Break-Even Point Increases

When fixed costs decrease: Break-Even Point Decreases