If Variable Costs Per Unit Decreased Because of a Decrease

question 164

Multiple Choice

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

• A) decrease
• B) increase
• C) remain the same
• D) increase or decrease, depending upon the percentage increase in utility rates

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Definitions:

Break-even Chart

A graphical representation showing the point at which total costs and total revenues are equal, indicating no net loss or gain.

Fixed Costs

Fixed costs are expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Profit

The financial gain made in a transaction or operation, calculated as the difference between revenue and expenses.