ECONOMICS

Detailed explanation-1: -When you increase the contribution margin of the products you sell, you are decreasing the costs and expenses associated with each product and increasing the amount of revenue each product generates. The result of is a decrease in your break-even point.

Detailed explanation-2: -At break-even, your total contribution margin dollars only covers your fixed costs. There’s no extra money to generate a profit and free cash flow. That’s what the break-even point shows: when the dollars of your contribution margin equals your fixed cost.

Detailed explanation-3: -The break-event point can be reduced by increasing the average contribution margin earned on each sale. One way to do so is to reduce variable costs. One approach is to redesign products to reduce costs.

Detailed explanation-4: -Answer and Explanation: As the contribution margin per unit decreases, the break-even will increase. There is an inverse relationship between the contribution margin per unit and break-even point.

Detailed explanation-5: -Since some products (and services) have lower contribution margins than others, if a greater proportion of the lower contribution margin items are sold, the company will need to sell more units, thereby increasing the company’s break-even point.