Which of the following will result in an increase in the breakeven point, a decrease in the margin of safety, and a decrease in the contribution margin per unit?
A) An increase in the selling price per unit.
B) A decrease in fixed costs.
C) A decrease in the hourly wage paid to direct laborers.
D) An increase in the unit cost of direct materials.

Question

Quizplus · Accepted Answer

An increase in the unit cost of direct materials will increase the variable cost per unit, which decreases the contribution margin per unit. This leads to a higher breakeven point because more units must be sold to cover fixed costs. Additionally, with a higher breakeven point and unchanged sales, the margin of safety decreases, reflecting a smaller buffer between actual sales and the breakeven sales level.

Which of the Following Will Result in an Increase in the Breakeven