Which one of the following statements about break-even analysis for evaluating products or services is True?
A) The break-even quantity will tend to increase as the variable cost per unit of production decreases.
B) As sales increase beyond the break-even quantity, total before-tax profits tend to decrease.
C) A restaurant's opening of downsized facilities with only drive-through service is an example of lowering fixed costs and the break-even quantity.
D) Increasing the unit selling price has the effect of increasing the break-even quantity.

Question

Quizplus · Accepted Answer

Opening downsized facilities with only drive-through service would lower the rent for the restaurant owners and reduce other fixed costs. This would result in a lower break-even quantity for the restaurant as lower fixed costs mean a lower break-even point. A and D are incorrect because a decrease in variable cost per unit or an increase in unit selling price would increase the break-even quantity. B is incorrect because as sales increase beyond the break-even quantity, total before-tax profits tend to increase.

Which One of the Following Statements About Break-Even Analysis for Evaluating