Company X has variable costs per unit of $20,fixed costs of $300,000,and a break-even point in units of 60,000 units.If the sales price per unit decreases by $2 and the variable cost per unit decreases by $2,what would happen to the break-even point?
A) Break-even point increases.
B) Break-even point in dollars decreases.
C) Break-even point stays the same.
D) Break-even point in dollars decreases and break-even point in units stays the same.

Question

Quizplus · Accepted Answer

The break-even point in units stays the same because the decrease in sales price per unit is offset by the decrease in variable cost per unit. The break-even point in dollars decreases because the decrease in sales price per unit reduces the total revenue at the break-even point.

Company X Has Variable Costs Per Unit of $20,fixed Costs