A firm's break-even point will rise if
A) fixed costs decrease
B) contribution margins increase
C) price per unit rises
D) variable cost per unit rises

Question

Quizplus · Accepted Answer

The break-even point is the point at which a firm's total revenue is equal to its total cost. If the variable cost per unit rises, the total cost will increase for each unit sold, and thus, the break-even point will rise as well. Therefore, option D is the correct answer. The other options would have the opposite effect on the break-even point: lower fixed costs, higher contribution margins, or a higher price per unit would all decrease the break-even point.

A Firm's Break-Even Point Will Rise If