Which of the following occurs if a company experiences an increase in its fixed costs?
A) Net income would increase.
B) The break-even point would increase.
C) The contribution margin would increase.
D) The contribution margin would decrease.
E) More than one of the other answers would occur.

Question

Quizplus · Accepted Answer

An increase in fixed costs would cause the break-even point to increase, as the company would need to sell more units to cover the higher fixed costs. Net income would not necessarily increase, as it would depend on whether the increase in sales could offset the higher fixed costs. The contribution margin would not necessarily increase, as it would depend on whether the increase in sales could cover the higher fixed costs. The contribution margin would decrease if there was a decrease in sales, but this is not mentioned in the question.

Which of the Following Occurs If a Company Experiences an Increase