Answered: What will happen to a company’s…

What will happen to a company’s break-even point if the sales price and unit variable cost of its only product increase by the same dollar amount?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Would an increase in per-unit selling price cause a company’s break-even point to increase or decrease? Why?
“Since break even analysis focuses on making Zero profit, it is of no value in determining the units a company must sell to earn a targeted profit”, Do you agree or disagree with this statement? Why or why not?
A company's break-even point will not be changed by: a change in the selling price per unit. a change in the income tax rate. a change in the variable cost per unit. a change in total fixed costs.
How does the break-even point equation change for a company with multiple products or services compared to a single-product company?
Companies often use leverage to augment profits. Based on what you learned this week, please explain the following in detail: With regards to Operating Leverage, please explain why a company with HIGH Operating Leverage faces greater financial risk in a declining sales period compared to a company with LOW Operating Leverage. (HINT: The key here is the relation between fixed costs and variable costs.) What does a business's Contribution Margin represent? What does the Contribution Margin have to do with Operating Leverage?
Since break-even analysis focuses on making zero profit, it is of no value in determining the units a firm must sell to earn a targeted profit. Do you agree or disagree with this statement? why?
Which of the following items will not cause the company's ROA to increase? Multiple Choice O O Reducing costs. Reducing company assets without impacting sales. Increasing company assets. Increasing the selling price per unit. $