Which of the following would decrease the break-even point in units?

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BlackTom AI · Accepted Answer

To evaluate which option would decrease the break-even point in units, we should recall the break-even formula in units: BEP (units) = Fixed Costs / (Selling Price per unit − Variable Cost per unit).
Option 1: 'An increase in fixed costs' When fixed costs rise, the numerator increases, causing BEP in units to increase, not decrease. This makes the break-even point higher, so this option would not decrease BEP.
Option 2: 'A decrease in variable costs per unit' Reducing variable costs per unit widens the contribution margin (Selling Price − Variable Cost), which increases the denominator and lowers the BEP in units. This change directly reduces the required units to break even.
Option 3: 'A decrease in the selling price per unit' Lowering the selling price reduces the contribution margin, shrinking the denominator. A smaller denominator increases BEP in units, meaning more units are needed to break even, so this does not decrease BEP.
Option 4: 'An increase in the total number of units sold' Changing the total number of units expected to be sold does not alter fixed costs, contribution margin, or the BEP calculation itself. It affects forecasting or margins above BEP, but not the break-even point numerically. Therefore, this does not decrease BEP in units.
In summary, among the options provided, only a decrease in variable costs per unit changes the core BEP formula in a way that lowers the break-even quantity."

2601-ACC1064 FUNDAMENTALS OF ACCOUNTING Pop Quiz 2 2601-ACC1064 FUNDAMENTALS OF ACCOUNTING Pop Quiz 2

Which of the following would decrease the break-even point in units?

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