The break-even point in unit sales increases when variable expenses:
A)increase and the selling price remains unchanged.
B)decrease and the selling price remains unchanged.
C)decrease and the selling price increases.
D)remain unchanged and the selling price increases.

Question

Quizplus · Accepted Answer

In order to reach the break-even point, total revenue (selling price x units sold) must be equal to total costs (fixed costs + variable expenses x units sold). If variable expenses increase, then a higher number of unit sales are required to cover those expenses and reach the break-even point. Since the selling price remains unchanged, this means that each unit sold will have a lower contribution margin (selling price - variable expenses), requiring more units to be sold to cover fixed costs and reach the break-even point.

The Break-Even Point in Unit Sales Increases When Variable Expenses