The break-even point can be lowered by

The break-even point can be lowered by
| The break-even point can be lowered by

A. Increasing the fixed costs

B. Increasing the variable costs

C. Decreasing the slope of the income line

D. Reducing the variable cost

Please scroll down to see the correct answer and solution guide.

Right Answer is: D

SOLUTION

Breakeven analysis is used to find the minimum level of production required. It evaluates both fixed and variable costs.

A breakeven analysis is used to determine how much sales volume your business needs to start making a profit, based on your fixed costs, variable costs, and selling price.

Break-even analysis consists of:

  1. Fixed cost (F)
  2. Variable cost (V)
  3. Sales revenue (S)

 

\(BEP = \left( {\frac{F}{{S - V}}} \right)\)

In can be seen that BEP will decrease when Fixed cost and variable cost will decrease.

BEP will decrease when selling cost increase or the slope of the income line will decrease.

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