Discussion
If that firm's fixed cost rises to 400 000, its break-even quantity becomes
Answer: D
Correct answer: 20 000 units
With the contribution unchanged at 20,
\[ Q_{BE} = \frac{400\,000}{20} = 20\,000 \ \text{units} \]A third more fixed cost has raised the break-even quantity by a third, since the break-even is directly proportional to the fixed cost. The margin of safety at 20,000 units has vanished entirely.
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