All else equal, one firm will have a lower breakeven point than another firm if
A)its fixed costs are higher.
B)its selling price of the product is higher.
C)its variable operating cost per unit is higher.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

The breakeven point is the level of sales at which a firm neither earns a profit nor incurs a loss. It is dependent on fixed costs, selling price, and variable operating costs per unit. All else equal, a firm with a higher selling price for its product will have a lower breakeven point because each unit sold will contribute more towards covering the fixed costs. A higher fixed cost or variable operating cost per unit would increase the breakeven point. Therefore, choice B is the best option as it reflects the only factor that would lower the breakeven point.

All Else Equal, One Firm Will Have a Lower Breakeven