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Breakeven point in units increases when unit costs a. increase and sales price remains unchanged. b. decrease and sales price remains unchanged. c. Remain unchanged and sales price increases. d. decrease and sales price increases.
a. increase and sales price remains unchanged.
a. increase and sales price remains unchanged.
the reason is that when unit cost increase then and unit sale price remain same then the contribution per unit decrease and the break even formula
B.E in units FC/ Contribution per unit
eg. sale price =6, V C is 4 then contibution2=6-4 , then6/2=3
if unit cost cost Increase,
eg. sale price =6, V C is 4.5 then contibution1.5=6-4.5 , then 6/1.5=4
A is the correct answer
Option (A)
A is the correct answer as BEP = FC / UCM
When costs increased and sales price is unchanged the CM "contribution margin" will decrease as CM = SP-VC
SP = Sales price , VC = Total variable costs
So the denominator will decrease and numerator FC "fixed costs" will increase which will lead to increase in breakeven point in units.
