Suppose Variable Costs Per Unit Decrease

question 80

Multiple Choice

Suppose variable costs per unit decrease. What will be the effect on sales volume at the break-even point?

• A) Sales volume will increase.
• B) Sales volume will decrease.
• C) Sales volume will remain the same.
• D) Sales volume will remain the same; however, contribution margin per unit will decrease.

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Definitions:

Inelastic Demand

A situation where the demand for a product does not change significantly in response to price changes.

Midpoint Method

A technique used in economics for calculating the percentage change between two numbers, considering the average of the two numbers as the base.

Price Elasticity

A measure of the responsiveness of quantity demanded or supplied to changes in price.

Price Elasticity

An indicator of the sensitivity of consumer demand for a product to variations in its price, demonstrating how significantly the quantity of the good demanded changes in response to price fluctuations.