A process change will reduce unit variable cost while leaving the product price and total fixed cost unchanged. This will necessarily reduce the product's breakeven volume.

Question

Quizplus · Accepted Answer

A reduction in unit variable cost decreases the cost per unit produced, without affecting the selling price or total fixed costs, thereby lowering the breakeven volume. This is because the breakeven volume is calculated by dividing the total fixed costs by the difference between the selling price per unit and the variable cost per unit. When the variable cost per unit decreases, this difference increases, leading to a lower breakeven volume.

A Process Change Will Reduce Unit Variable Cost While Leaving