Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Application of Cost Accounting for Business Decisions

Which of the following changes would reduce the break-even point in units, other things remaining constant?

An increase in selling price per unit reduces the break-even point. Break-even units equal fixed costs divided by contribution per unit, and a higher price raises contribution per unit, so fewer units are needed to recover the same fixed costs.

  1. AAn increase in total fixed costs
  2. BAn increase in variable cost per unit
  3. CAn increase in selling price per unitCorrect
  4. DA decrease in selling price per unit

Explanation

Break-even units = fixed costs / contribution per unit. A higher selling price raises contribution per unit, so fewer units are required to cover fixed costs. The other changes either raise fixed costs or lower unit contribution, increasing break-even.

Did you get it right without looking?

One question tells you little. A timed set on Application of Cost Accounting for Business Decisions shows your real accuracy, how long you take and where you lose marks.

Practise Application of Cost Accounting for Business DecisionsFree diagnostic mock

More Application of Cost Accounting for Business Decisions questions