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It is a true statement that if the fixed expenses of an organization double, then the...

It is a true statement that if the fixed expenses of an organization double, then the break-even point in units would double?

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Answer #1

Yes, it is true statement that if the fixed expenses of an organization double, then the break-even point in units would double. However, it is assumed that there is no change in contribution margin per unit. Contribution margin per unit is selling price per unit minus variable cost per unit. Thus, selling price per unit and variable cost per unit are assumed to be same. Only change in one factor, that is fixed costs is should be double. Due to this, not only break-even point in units would double but also break-even point in dollars.

Breakeven point (in units) = fixed expenses / contribution margin per unit

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