Mark Company currently sells a video recorder with a selling price of £300 per unit. The variable expense per unit is £175 and fixed expenses are £100,000. If the company reduces variable expenses by £20 per unit and increases the fixed expenses by £10,000, the break-even point will increase

Question

Quizplus · Accepted Answer

Reducing the variable expense per unit increases the contribution margin per unit, and although fixed expenses increase, the higher contribution margin per unit means fewer units need to be sold to cover the new fixed expenses, potentially lowering the break-even point, not increasing it.

Mark Company Currently Sells a Video Recorder with a Selling