Companies that are substituting fixed costs for variable costs receive a greater per unit return above the breakeven point.

Question

Quizplus · Accepted Answer

When a company substitutes fixed costs for variable costs, they end up with a lower breakeven point. This means that for each unit sold beyond the breakeven point, the company earns a higher per unit margin or return. This is because the additional units sold will only incur variable costs, which are typically lower than fixed costs. Therefore, companies that substitute fixed costs for variable costs have a greater per unit return above the breakeven point.

Companies That Are Substituting Fixed Costs for Variable Costs Receive