ECONOMICS

Detailed explanation-1: -If your business’s revenue is below the break-even point, you have a loss. But if your revenue is above the point, you have a profit. Use your break-even point to determine how much you need to sell to cover costs or make a profit.

Detailed explanation-2: -The break-even point will be reduced by any (or any combination) of the following: Decreasing the amount of fixed costs/expenses. Decreasing the per unit variable costs/expenses. Increasing the selling prices without causing a decrease in sales.

Detailed explanation-3: -A decrease in the number of units sold will decrease the break-even point. The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin. Fawn Company’s margin of safety is $90, 000. If the company’s sales drop by $80, 000, it will still have positive net operating income.

Detailed explanation-4: -Lower sales prices will decrease the contribution margin per unit and cause the break-even point in unit sales to increase.