If the price per unit decreases because of competition but the cost structure remains the same
A)the break-even point rises.
B)the degree of combined leverage declines.
C)the degree of financial leverage declines.
D)All of the options

Question

Quizplus · Accepted Answer

If the price per unit decreases and the cost structure remains the same, the revenues for each unit will be lower, which in turn will increase the break-even point. This means that the company will have to sell more units to cover its fixed costs and start earning a profit. Therefore, option A is the correct answer. Options B and C are incorrect because the degree of combined leverage and degree of financial leverage are both related to the company's cost and capital structure, respectively, and would not be impacted by a decrease in the price per unit. Option D is incorrect because only option A is true.

If the Price Per Unit Decreases Because of Competition but the Cost