Which of the Following Statements Is True If Total Fixed

question 174

Multiple Choice

Which of the following statements is true if total fixed costs decreases while the sales price per unit and variable costs per unit remain constant?

• A) The contribution margin increases.
• B) The breakeven point increases.
• C) The contribution margin decreases.
• D) The breakeven point decreases.

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Definitions:

Break-even Sales

The amount of revenue required to cover both the variable and fixed costs of production, leading to a situation where a business makes neither profit nor loss.

Variable Costs

Costs that vary directly with the level of production output.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Operating Income

The profit realized from a business's core operations, excluding deductions of interest and tax, representing the efficiency of the company's core business.