# ECONOMICS

## COST ACCOUNTING

### BREAK EVEN POINT

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What happens to break-even output if contribution per unit increases and fixed costs stay the same?
 A It stays the same B It is cancelled out C It increases D It falls
Explanation:

Detailed explanation-1: -An increase in fixed cost will increase the break-even units as an increase in the numerator will increase the ratio. The break-even point is calculated as fixed cost divided by contribution per unit, so as the fixed cost increases the units required to cover the fixed cost will also increase.

Detailed explanation-2: -The break-even point will increase by any of the following: An increase in the amount of the company’s fixed costs/expenses. An increase in the per unit variable costs/expenses.

Detailed explanation-3: -Your break-even point is equal to your fixed costs, divided by your average selling price, minus variable costs. It is the point at which revenue is equal to costs and anything beyond that makes the business profitable.

Detailed explanation-4: -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-5: -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.

There is 1 question to complete.