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A rise in variable cost per unit, other things equal, moves the break-even point

  • A.upward, by reducing the contribution per unit
  • B.downward, by reducing the contribution per unit
  • C.upward, by raising the fixed cost
  • D.not at all, variable cost affecting only profit

Answer: A

Correct answer: upward, by reducing the contribution per unit

A higher variable cost leaves less contribution per unit, so more units are needed to cover the same fixed cost and the break-even quantity rises. On the chart the total cost line steepens while the revenue line is unchanged, so the two cross further to the right. The fixed cost is untouched, and variable cost affects the break-even point precisely because it affects contribution.

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