Assume fixed costs are constant and contribution margin per unit is reduced by 50 percent.What will happen to the break-even point in units?
A) It will decrease 50 percent.
B) It will increase 100 percent.
C) It will be the same.
D) It will increase 50 percent.

Question

Quizplus · Accepted Answer

The break-even point in units increases when the contribution margin per unit decreases. This is because the contribution margin per unit is used to cover fixed costs; if it's reduced by 50%, it takes twice as many units to cover the same fixed costs, hence a 100% increase in the break-even point.

Assume Fixed Costs Are Constant and Contribution Margin Per Unit