0
What happens to the breakeven point when you increase the selling price?
Wiki User
∙ 9y ago
Increase in selling price reduces the breakeven point because due to increase in price contribution margin ratio also increases.
Wiki User
∙ 9y ago
Add your answer:
Earn +20 pts
How an increase in unit selling prices might affect contribution margin?
Increase in unit selling price while other costs remains same will increase the contribution margin and reduce the breakeven point.
If a firms fixed financial costs decrease the firms operating breakeven point will do what?
decrease <--------WRONG!!!!! The operating breakeven point will remain unchanged.
Which is more important accounting break-even point or financial break-even point?
The financial breakeven point is a more relevant measure than the accounting breakeven point because the accounting breakeven point does not consider the initial investment in the project. With any investment, one has the option to venture into it, or to take a less risky route and invest (in a bond or a stock that would give them a more guaranteed return). Thus an accounting breakeven, considers all cost, except the opportunity cost of the capital invested in project, and this is something that the financial breakeven considers. Financial breakeven point is the point where NPV is greater than or equal to zero: the point where there is economic value added® (a term trademarked by Stem-Stewart). This is because in calculating the financial breakeven, the formula includes the opportunity cost of capital: the initial investment divided by the timeannuity factor at the discount rate (where the discount rate is the opportunity cost of capital).
If the price per unit decreases because of competition but the cost structure remains the same will the breakeven point rise?
Yes breakeven point will rise because contribution margin per unit reduces that's why more units require to recover fixed cost.
Calculation of break-even point?
Breakeven point = Fixed Cost / Contribution margin ratio Contribution margin ratio = (Sales - Variable Cost) / Sales
How an increase in unit selling prices might affect contribution margin?
Increase in unit selling price while other costs remains same will increase the contribution margin and reduce the breakeven point.
How do you calculate breakeven point?
breakeven point (units) = fixed costs/contribution contribution = selling price - variable costs per unit
What happens to break even point if fixed cost increase and variable cost decrease?
If fixed cost is increased it means more number of units are required to cover fixed cost that's mean breakeven point will increase as well. If variable cost reduces then it means there is increase in contribution margin and contribution margin ratio which means that less number of units will be required to cover fixed cost hence breakeven point will reduce.
Increase any of the fixed cost what happens to the numbers of units in the break even?
Increased in fixed cost causes the breakeven point to increase as well because now more units requires to fill the fixed cost.
Does break even point and break even analysis means the same?
Breakeven point is the point where firm has no profit no loss while breakeven analysis is the process of finding out the breakeven point.
Breakeven point in units?
The Formula of Breakeven point (in units)= Fixed Cost / Contribution per unit
How does an increase in income tax rate effect the breakeven point?
No, an increase in the tax rate only affects a positive income; at break even there is no amount to tax
How do you calculate the breakeven point?
Formula for Breakeven point: Breakeven point = Fixed Cost / Contribution margin ratio Contribution margin ratio = Sales / contribution margin Contribution margin = sales - variable cost
If variable labor costs decline other things are held constant how will this effect a firms breakeven point?
breakeven point will decrease
If a firms fixed financial costs decrease the firms operating breakeven point will do what?
decrease <--------WRONG!!!!! The operating breakeven point will remain unchanged.
The breakeven point is the point at which the?
where all your Fixed Costs are covered. To find the number of units at which you will breakeven you divide fixed costs by the contribution per unit
Cost of goods sold is equal to?
breakeven point
