In the last period, the break-even point of a product was 50,000 units and the firm made and sold 80,000 units. In the current period, selling prices were stable, fixed costs increased, unit variable costs decreased and the break-even point remained the same. Current period production and sales are scheduled at 80,000 units. In that case,
A. profit should remain unchanged
B. fixed cost per unit will remain the same
C. the break-even point in dollars will decrease
D. profit should increase
E. none of the above
PLEASE PROVIDE A BRIEF EXPLANATION
Decrease in unit variable costs and stability in selling price means higher contribution margin per unit. It means that for every unit sold, there is larger ...
Solution discusses the effect of increasing fixed costs and decreasing variable costs on profits.