Which of the following would not affect the break-even point?
A) number of units sold
B) variable expense per unit
C) total fixed expenses
D) selling price per unit
The Correct Answer and Explanation is:
Correct Answer: A) Number of units sold
Explanation:
The break-even point is the point at which total revenues equal total expenses — meaning no profit or loss is made. It’s a critical financial analysis tool that helps businesses determine the minimum sales volume needed to avoid losing money.
The break-even point in units is calculated using the following formula:
$$
\text{Break-even point (units)} = \frac{\text{Total Fixed Costs}}{\text{Selling Price per Unit} – \text{Variable Cost per Unit}}
$$
This formula tells us the number of units that must be sold to cover all costs.
Now, let’s break down each option:
A) Number of units sold – CORRECT ANSWER
The number of units sold does not affect the break-even point — rather, it’s the result of the break-even analysis. The break-even point determines how many units must be sold to reach zero profit. If a business sells more than the break-even units, it makes a profit. If it sells fewer, it incurs a loss. Therefore, the number of units sold is a performance measure, not a factor that influences the break-even point itself.
B) Variable expense per unit – Affects break-even point
If the variable cost per unit increases, the contribution margin (selling price – variable cost) decreases, which means the company must sell more units to break even. A higher variable cost per unit raises the break-even point.
C) Total fixed expenses – Affects break-even point
If fixed costs rise, the business needs to generate more contribution margin to cover those fixed costs, thus increasing the break-even point. Lower fixed costs would have the opposite effect.
D) Selling price per unit – Affects break-even point
An increase in selling price increases the contribution margin, which means fewer units need to be sold to cover fixed costs. Conversely, a lower selling price increases the break-even point.
Conclusion:
Only option A (number of units sold) does not affect the break-even point — it is what the break-even point calculates, not what influences it.