Discussion
Three of the following raise a plant's breakeven output. Which lowers it?
A higher selling price per tonne
Higher fixed costs
A higher variable cost per tonne
A larger depreciation charge
Answer: C
Correct answer: A higher selling price per tonne
Breakeven is fixed cost divided by contribution, and a higher price raises the contribution, so the breakeven output falls. Higher fixed costs raise the numerator; a higher variable cost cuts the contribution; and depreciation is itself a fixed cost. All three of those push breakeven up.
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