If a Company Is Currently Operating at Its Break-Even Point

question 24

Multiple Choice

If a company is currently operating at its break-even point, which of the following statements is true? (Income tax considerations are ignored.)

• A) If fixed costs increase, net profit will decrease by the contribution margin ratio times the amount of the increase in fixed costs.
• B) If sales increase by 20%, net profit will also increase by 20%, assuming that fixed costs are not equal to zero.
• C) If variable costs double, net profit will decrease by 50%.
• D) Net profit will increase by the increase in number of units sold times the contribution margin per unit.

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Definitions:

Business Meeting

A formal gathering of individuals within or between organizations to discuss business matters, make decisions, or share information.

Drinks

Drinks refer to liquids that are consumed, which can include a variety of beverages such as water, soda, tea, coffee, and alcohol.

Mobile Phone

A portable telephone that can make and receive calls over a radio frequency while moving around a wide geographic area.

Text And Email

Forms of digital communication where text messages are sent over cellular networks and emails are exchanged through internet services.