If fixed costs rise, what happens to the break-even output?

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Multiple Choice

If fixed costs rise, what happens to the break-even output?

Explanation:
When fixed costs rise, more revenue must be generated just to cover those costs before making any profit. The break-even point in units is calculated as fixed costs divided by the contribution per unit (selling price minus variable cost). If the fixed costs go up while the contribution per unit stays the same, the quotient increases, so you must produce more units to reach break-even. So the break-even output increases. For example, if fixed costs rise from 10,000 to 15,000 and each unit adds a contribution of 5, break-even units go from 2,000 to 3,000.

When fixed costs rise, more revenue must be generated just to cover those costs before making any profit. The break-even point in units is calculated as fixed costs divided by the contribution per unit (selling price minus variable cost). If the fixed costs go up while the contribution per unit stays the same, the quotient increases, so you must produce more units to reach break-even. So the break-even output increases. For example, if fixed costs rise from 10,000 to 15,000 and each unit adds a contribution of 5, break-even units go from 2,000 to 3,000.

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