If calculations show that the break-even point is too high for the period, which of these is not a possible course of action?

Question

BlackTom AI · Accepted Answer

Break-even point (units) = Fixed costs / (Selling price − Variable cost per unit). The contribution margin per unit (selling price minus variable cost) is the key driver: higher contribution lowers break-even units; lower contribution raises it.

1. Relevant knowledge points and concepts
- Break-even analysis: identifies sales required for total revenue = total costs.
- Contribution margin: selling price − variable cost per unit; used in denominator of break-even formula.
- Fixed costs are spread over units; reducing contribution increases units needed to cover fixed costs.
- Management responses to a high break-even include raising contribution margin, reducing fixed costs, shifting sales mix, or validating cost/revenue assumptions.

2. Step-by-step reasoning
- Start from formula: BE_units = Fixed / Contribution.
- If contribution falls, BE_units increases (inverse relationship).
- Consider candidate actions: any action that raises contribution or reduces fixed costs (or reliably increases volume enough) can lower BE; actions that lower contribution will push BE higher.

3. Calculation example (intermediate steps)
- Suppose fixed costs = $10,000, variable cost per unit = $6, selling price = $10.
- Contribution = $10 − $6 = $4; BE = $10,000 / $4 = 2,500 units.
- If price is reduced to $8: contribution = $8 − $6 = $2; BE = $10,000 / $2 = 5,000 units.
- Price reduction doubled break-even units, making the situation worse unless demand increases massively.

4. Why the correct answer is correct
- “Consider reducing prices” is not an appropriate remedy for a too-high break-even because reducing price lowers the contribution margin and therefore increases the break-even quantity (unless an assured and sufficiently large volume increase offsets this — which is speculative). Thus, as a general corrective action it is counterproductive.

5. Why the other options are possible (briefly)
- Increasing advertising costs: may raise sales volume; if incremental contribution from extra sales exceeds the advertising cost, break-even can be reduced—so this is a viable (though risky) option.
- Changing the sales mix: shifting toward higher-contribution products increases average contribution margin and lowers break-even—clearly a valid action.
- Confirm cost forecasts: verifying fixed/variable cost estimates and revenue assumptions can reveal errors; accurate inputs may reduce the calculated break-even or indicate appropriate responses—so this is a reasonable first step.

6. Conclusion
Therefore, “Consider reducing prices.” is the option that is not a possible (or advisable) course of action for a too-high break-even. This matches the provided answer.

If calculations show that the break-even point is too high for the period, which of these is not a possible course of action?单项选择题

类似问题

EA 7 - If they purchase the machine, the number of units needed to breakeven will

Break-even for a multiple product firm ________.

When sales price decreases and all other variables are held constant, the break-even point will ________.

Barb’s Best Pies sells a meat pie for $5.00. Variable costs are $3.00 per unit and fixed costs for the period are $4,000. What is the profit (loss) based on the sales volume at 1,000 pies?

Breakeven point is best defined as total revenue equal to

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents the

Device Nation Pty's fixed costs are $200 000 and variable costs are 60% of the selling price. What is Device Nation Pty's break-even point in sales dollars?

A firm is considering a new project with estimated depreciation of $1,000, fixed costs of $3,600, and total sales of $8,146 at the accounting break-even level. The variable costs per unit are estimated at $5.61. What is the accounting break-even level of production?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单