Question

Break-even point increases with:

• A. decrease in fixed cost
• B. decrease in variable cost for a given value of price
• C. decrease in unit contribution
• D. decrease in manufacturing cost

Hint:

The break-even point increases when the unit contribution decreases, as more units are needed to cover fixed costs.

Answer 1

The Correct Option is C

Step 1: Understanding break-even point.
The break-even point is the point where total revenue equals total cost, resulting in zero profit. It depends on fixed costs, variable costs, and unit contribution (the amount contributed per unit to cover fixed costs).

Step 2: Explanation of options.
- (C) If the unit contribution decreases (i.e., the profit per unit decreases), the break-even point increases because more units need to be sold to cover fixed costs. - (A) A decrease in fixed cost would decrease the break-even point, not increase it. - (B) A decrease in variable cost for a given price would reduce the break-even point, not increase it. - (D) A decrease in manufacturing cost would reduce the break-even point.

Final Answer: \[ \boxed{\text{C) decrease in unit contribution}} \]