Which change could reduce ABC's break-even output?

• A. Increase variable costs per unit.
• B. Lower fixed costs.
• C. Lower selling prices.
• D. Decrease process efficiency.

Answer: (B)

The key idea is how much you must sell to cover all costs. Break-even output in units equals fixed costs divided by the contribution per unit (price minus variable cost). So lowering fixed costs reduces the numerator, meaning you need fewer units to cover all costs. For example, if fixed costs drop, even with the same price and variable costs, the number of units needed to break even goes down.

The other changes would not reduce break-even. Increasing variable costs lowers the contribution per unit, so you’d need more units to cover costs. Lowering selling prices also lowers the contribution per unit, increasing the required quantity to break even. Decreasing process efficiency typically raises costs or reduces output, which would also raise the amount needed to break even.