The strategy MOST likely to reduce the break-even point would be to:
A)decrease the fixed costs and increase the contribution margin.
B)decrease both the fixed costs and the contribution margin.
C)increase the fixed costs and decrease the contribution margin.
D)increase both the fixed costs and the contribution margin.

Question

Quizplus · Accepted Answer

The break-even point is the level of sales at which total revenues equal total costs. To reduce the break-even point, we need to increase the contribution margin or decrease the fixed costs or both. Of the given options, decreasing the fixed costs and increasing the contribution margin would be the most effective strategy. This is because a higher contribution margin means that more revenue is available to cover fixed costs and generate profits. Similarly, lower fixed costs mean that the break-even point can be reached at a lower level of sales. Therefore, reducing fixed costs and increasing the contribution margin will have a synergistic effect on reducing the break-even point.

The Strategy MOST Likely to Reduce the Break-Even Point Would